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Fed officials discuss timing to reduce bond purchases


Federal Reserve officials at their June meeting began debating when and how they would reduce monthly bond purchases, which they have used to keep long-term interest rates under control.

WASHINGTON — Federal Reserve officials at their June meeting began debating when and how they would reduce monthly bond purchases, which they have used to keep long-term interest rates under control.

The discussions unfolded in the minutes of the Fed’s June meeting, released on Wednesday, indicate the Fed is moving closer to reducing those purchases, though most analysts don’t expect a reduction until later this year.

In a statement released after the June 15-16 meeting, Fed officials indicated they would likely dial back their low-interest rate policies sooner than previously. Policymakers predict they will increase the Fed’s benchmark short-term interest rate twice by the end of 2023. In March, he indicated that there would be no rate hike before 2024.

Earlier rate hikes suggest the Fed may push ahead with a timetable to reduce its bond purchases. The Fed is buying $120 billion a month in Treasury securities and mortgage-backed bonds to keep long-term interest rates low and encourage more borrowing and spending. It has said it will keep buying until the economy makes “significant further progress” toward its goals of full employment and the rate of inflation hits a little over 2%.

With the announcement of the change likely in late August at the Fed’s annual conference in Jackson Hole, Wyoming, most economists still expect those purchases to decrease, or thin, by the end of this year or early next year. We do.

Some differences have emerged among the Fed’s regional bank presidents over the timing of the tapering, with Dallas Fed Chairman Robert Kaplan saying last week that he favored pulling back on purchases “sooner than later.”

Yet San Francisco Fed Chair Mary Daly said last week in an interview with the Associated Press that it would be “appropriate” to consider tapering later this year or early next year. But she cautioned that the economy is “far from full employment”, with price stability one of the Fed’s two goals.

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