Most Federal Reserve officials agreed they could start reducing the pace of their bond-buying purchases this year because they had hit their inflation goal and were closer to reaching their standard for progress on reducing unemployment.
“Various participants commented that economic and financial conditions would likely warrant a reduction in coming months,” minutes of the Federal Open Market Committee’s July 27-28 gathering released Wednesday said. “Several others indicated, however, that a reduction in the pace of asset purchases was more likely to become appropriate early next year.”
The minutes also showed that most participants “judged that it could be appropriate to start reducing the pace of asset purchases this year.”
U.S. central bankers next meet September 21-22. While the record shows officials don’t have agreement on timing or pace of tapering yet, most reached consensus on keeping the composition of any reduction in Treasury and mortgage-backed securities purchases proportional.
“The FOMC minutes again reveal a wide spread of opinion on the question of the timing, speed, and structure of the upcoming tapering,” Ian Shepherdson, chief economist at Pantheon Macroeconomics Ltd. said after the release.
Fed policy makers have differed publicly in the weeks since the meeting over when the central bank should start tapering with some, like Minneapolis Fed President Neel Kashkari wanting to a see a “few more” strong jobs reports and others such as Boston Fed President Eric Rosengren saying he’s open to announcing plans for a reduction at the next meeting if Septembers employment figures come in well.
St. Louis Fed President James Bullard said Wednesday that he would like to see the tapering of the asset-purchase program done by the first quarter of 2022.
On the composition of bond-buying purchases, “most participants remarked that they saw benefits in reducing the pace of net purchases of Treasury securities and agency MBS proportionally.”
The minutes indicate that officials still see room for labor-market improvement. Job gains have been strong, averaging 617,000 a month through July this year. The unemployment rate stood at 5.4% last month, but broader measures still show slack.
The employment-to-population ratio for workers between 25 and 54 years old was 77.8% last month compared to 80.5% at the start of 2020, while Hispanic and Black unemployment rates remain high at 6.6% and 8.2%.