Fed minutes likely to detail bond-buying taper talks, inflation wor
WASHINGTON (Aug 18) - Insight into the Federal Reserve's debate over when to end its pandemic-era emergency programs and the level of concern among officials over a spike in inflation should emerge on Wednesday with the release of a readout of the U.S. central bank's policy meeting last month.
The minutes of the July 27-28 meeting, which are due to be released at 2 p.m. EDT (1800 GMT), will cover a session at which the Fed said it still had faith in the U.S. economic recovery even as the Delta variant of the coronavirus was fueling a troubling rise in cases. Officials also continued laying plans for the eventual end of the central bank's $120 billion in monthly purchases of Treasury bonds and mortgage-backed securities (MBS).
Although the health crisis has intensified in the past three weeks, the economic recovery remains largely on track. U.S. job growth was strong through July and inflation remained well above the Fed's 2% target - so much so that some central bank policymakers have since urged a quick end to emergency programs that they argue have outlived their usefulness.
Analysts expect the Fed to announce its plan for a "taper" of its asset purchases as early as the Sept. 21-22 meeting of the policy-setting Federal Open Market Committee (FOMC), with less certainty about how fast the actually reduction in the bond-buying program will proceed.
Fed Chair Jerome Powell may provide information as well in remarks to the central bank's annual research conference in Jackson Hole, Wyoming, next week.
A "uniquely uneven economic recovery has led to a splintering within the (FOMC)" among those who feel the purchases should be reduced soon and ended fast, and those who feel the Fed should be patient until the job market recovers more fully, wrote Kathy Bostjancic, chief U.S. financial economist for Oxford Economics.
Demand is outstripping the ability of global supply chains and labor markets to keep pace and driving inflation higher, prompting officials like St. Louis Fed President James Bullard to argue the bond purchases should end soon so the central bank can raise its benchmark overnight interest rate from the current near-zero level if needed. Fed officials want the bond-buying program completed before any hike in borrowing costs.
On the other hand, "dovish committee members believe (quantitative easing) should continue until greater clarity is garnered on the prospective pace of inflation and until the recovery in the labor market" is more complete, Bostjancic wrote.
Reuters
