Fed officials felt taper may happen at next few meetings: minutes

Wed Nov 20, 2013 3:59pm EST
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By Alister Bull and Jason Lange

WASHINGTON (Reuters) - Federal Reserve officials felt they could decide to start scaling back the U.S. central bank's massive asset-purchase program at one of its next few meetings provided this was warranted by economic growth.

Minutes of the Fed's October 29-30 policy meeting, released on Wednesday, also showed officials discussed how to distinguish between asset buying and forward interest rates guidance, including how to enhance rate guidance once they start to taper bond purchases.

Some suggested reducing the interest paid to banks on excess reserves held at the Fed would help to hammer home its intention to keep interest rates low.

Some thought reducing the unemployment threshold on when the Fed would start to consider raising rates might help. But that suggestion appeared to have been countered by other officials who worried that changing the threshold would undermine Fed credibility.

"Many members stressed the data-dependent nature of the current asset-purchase program," according to the minutes. "Some pointed out that, if economic conditions warranted, the Committee could decide to slow the pace of purchases at one of its next few meetings."

Policymakers of the Federal Open Market Committee are next scheduled to gather on December 17-18.

U.S. stocks .SPX and crude oil prices turned lower on the news of the minutes, while yields on U.S. Treasury bonds went up.

Economists said the tone of the debate among officials last month highlighted their desire to shift the focus of their policy action from bond buying toward forward guidance, aimed at holding down rate-hike expectations.   Continued...

An eagle tops the U.S. Federal Reserve building's facade in Washington, July 31, 2013. REUTERS/Jonathan Ernst