The Federal Reserve in its Sept. 17-18 monetary policy meeting saw heated debate over whether or not to taper its USD85 billion in monthly asset purchases but in the end, all but one voting member opted to leave the program unchanged.
Many investors were expecting the U.S. central bank to begin tapering its USD85 billion in monthly asset purchases in September, though concerns that recovery still faced headwinds prompted the Fed to leave the program in place.
"All members but one judged that it would be appropriate for the Committee to await more evidence that progress would be sustained before adjusting the pace of asset purchases. In the view of one member, the progress to date in labor markets and in broader economic conditions amply supported a reduction in purchases," the minutes read.
"In general, those who preferred to maintain for now the pace of purchases viewed incoming data as having been on the disappointing side and, despite clear improvements in labor market conditions since the purchase program's inception in September 2012, were not yet adequately confident of continued progress," the Fed also said.
Tightening conditions in the housing market and in other areas of the economy coupled with fiscal uncertainty in Washington convinced many to leave loose policies unchanged.
Tapering asset purchase in September could have exacerbated tightening credit conditions in areas of the financial system.
"As a result of such concerns, a number of participants thought that risk-management considerations called for a cautious approach and that, in light of the ambiguous cast of recent readings on the economy, it would be prudent to await further evidence of progress before reducing the pace of asset purchases," the minutes read.
Asset purchases aim to spur recovery by driving down long-term interest rates, weakening the dollar in the process.
Many were expecting the Fed to announce plans to begin tapering bond purchases at the September meeting, and the U.S. central bank hinted such a move could still come about later this year or in early 2014.
"With the markets apparently viewing a cut in purchases as the most likely outcome, it was noted that the postponement of such an announcement to later in the year or beyond could have significant implications for the effectiveness of Committee communications," the minutes read.
Still, when the Fed does move, expect it to go slowly
"Finally, it was noted that if the Committee did not pare back its purchases in these circumstances, it might be difficult to explain a cut in coming months, absent clearly stronger data on the economy and a swift resolution of federal fiscal uncertainties. Most of the participants leaning toward a downward adjustment in the pace of asset purchases also indicated that they favored a relatively small reduction to signal the Committee's intention to proceed cautiously."
Many investors were expecting the U.S. central bank to begin tapering its USD85 billion in monthly asset purchases in September, though concerns that recovery still faced headwinds prompted the Fed to leave the program in place.
"All members but one judged that it would be appropriate for the Committee to await more evidence that progress would be sustained before adjusting the pace of asset purchases. In the view of one member, the progress to date in labor markets and in broader economic conditions amply supported a reduction in purchases," the minutes read.
"In general, those who preferred to maintain for now the pace of purchases viewed incoming data as having been on the disappointing side and, despite clear improvements in labor market conditions since the purchase program's inception in September 2012, were not yet adequately confident of continued progress," the Fed also said.
Tightening conditions in the housing market and in other areas of the economy coupled with fiscal uncertainty in Washington convinced many to leave loose policies unchanged.
Tapering asset purchase in September could have exacerbated tightening credit conditions in areas of the financial system.
"As a result of such concerns, a number of participants thought that risk-management considerations called for a cautious approach and that, in light of the ambiguous cast of recent readings on the economy, it would be prudent to await further evidence of progress before reducing the pace of asset purchases," the minutes read.
Asset purchases aim to spur recovery by driving down long-term interest rates, weakening the dollar in the process.
Many were expecting the Fed to announce plans to begin tapering bond purchases at the September meeting, and the U.S. central bank hinted such a move could still come about later this year or in early 2014.
"With the markets apparently viewing a cut in purchases as the most likely outcome, it was noted that the postponement of such an announcement to later in the year or beyond could have significant implications for the effectiveness of Committee communications," the minutes read.
Still, when the Fed does move, expect it to go slowly
"Finally, it was noted that if the Committee did not pare back its purchases in these circumstances, it might be difficult to explain a cut in coming months, absent clearly stronger data on the economy and a swift resolution of federal fiscal uncertainties. Most of the participants leaning toward a downward adjustment in the pace of asset purchases also indicated that they favored a relatively small reduction to signal the Committee's intention to proceed cautiously."