Several Federal Reserve officials said the central bank should begin tapering its quantitative easing program later this year and stop it by year end, minutes of their March meeting showed.
The Federal Open Market Committee members “thought that if the outlook for labor market conditions improved as anticipated, it would probably be appropriate to slow purchases later in the year and to stop them by year-end,” according to the record of the March 19-20 FOMC meeting released this morning in Washington ahead of the regularly scheduled 2 p.m. time.
Fed officials, who met before a Labor Department report last week showed that payroll growth in March was the slowest in nine months, debated how and when to curtail asset purchases that have swollen its balance sheet to a record $3.22 trillion. The committee, led by Chairman Ben S. Bernanke, decided at the gathering to press on with $85 billion in monthly bond buying until the labor-market outlook has “improved substantially.”
“You have to take this with a really large grain of salt,” said John Herrmann, director of U.S. Rate Strategy at Mitsubishi UFJ Securities in New York, because the meeting was held before the March jobs report. That report showed “the economy doesn’t quite yet have the momentum to consistently grow near the Fed’s objectives” and an early tapering of Fed purchases is now “much less likely,” he said.
The Standard & Poor’s 500 Index rose 0.4% to 1,575.24 at 9:46 a.m. The yield on the benchmark 10-year Treasury note climbed to 1.78% from 1.75% late yesterday.
The Fed said it decided to release the minutes at 9 a.m. today, ahead of the usual 2 p.m. publication time, after they were mistakenly sent to some congressional staff and employees of trade organizations yesterday afternoon.
Policy makers aided by inflation below their 2% goal are continuing record accommodation to spur growth that decreased to a 0.4% annual rate in the fourth quarter, the slowest since the first quarter of 2011. The Fed also has held the main interest rate near zero since December 2008.
“Two members indicated that purchases might well continue at the current pace at least through the end of the year,” the minutes show. “It was also noted that were the outlook to deteriorate, the pace of purchases could be increased.”