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FOMC Asset Purchases To End In 2013‏?

ByDanske Markets
Published 01/04/2013, 06:17 AM
Updated 05/14/2017, 06:45 AM
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The most interesting part of the FOMC minutes from committee members’ discussion on further asset purchases revealed -- As in past meetings -- thatmembers are increasingly expressing concern over further expanding the Fed’s balance sheet.

This means that the FOMC is continuously doing a cost-benefit analysis on its asset-purchas program. In December, the benefits of expending the balance sheet were deemed larger than the costs yet again. A key phrase in the minutes, however, suggests that if the economic recovery continues and unemployment comes down at the projected pace, the Fed is likely to end its asset purchases before the end of this year:

a few members expressed the view that ongoing asset purchases would likely be warranted until about the end of 2013, while a few others emphasized the need for considerable policy accommodation but did not state a specific time frame or total for purchases. Several others thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet. One member viewed any additional purchases as unwarranted.

There was basically no discussion of the numerical threshold values for inflation and unemployment, which were announced at the December meeting and, hence, we did not get any more information as to how to interpret the new “rule”.

To Read the Entire Report Please Click on the pdf File Below.

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