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Federal Reserve officials took part in a detailed discussion of their asset purchase program at the meeting earlier this month, in which some members said they expected several changes. be adopted.
The Fed released the minutes of its November 4-5 policy meeting on Wednesday. Officials at that meeting voted to keep benchmark short-term lending rates pegged near zero.
Market participants were turning to the minutes to assess the position of policymakers on whether to increase or adjust the asset purchase program, which currently requires the Fed to buy $ 120 billion in treasury bills. and mortgage backed securities per month. The Fed could choose to increase buying or lengthen the term of these bonds.
While members said the current pace of buying helps keep financial conditions accommodating, they noted changes could be enacted if necessary. The discussion, however, did not imply a specific date for the changes, only that they could take place “soon enough”.
“Participants noted that the Committee could provide more housing, if necessary, by increasing the pace of purchases or shifting its purchases from the Treasury to those with a longer maturity without increasing the size of its purchases,” the lawsuit says. -verbal. “Otherwise, the Committee could provide more premises, if necessary, by purchasing at the same pace and composition over a longer horizon.”
Since the meeting, several Fed officials have revealed that a complex discussion of asset purchases took place during the meeting. An entire section of the minutes is devoted to these discussions.
Officials at the Federal Open Market Committee also expressed concern about the pace of the economic recovery, noting that growth was still well below pace before the coronavirus pandemic struck in March.
In his post-meeting press conference, Fed Chairman Jerome Powell said he felt the Fed still had a lot of political “ammunition” and promised the committee was “firmly committed to using these powerful tools to support the economy “.
Since then, the Fed has learned that it is starting 2021 without some of the weapons in its arsenal, with Treasury Secretary Steven Mnuchin ordering the central bank to return the collateral funding it received for several loan programs from the Fed. time of the pandemic. They include purchases of corporate bonds, loans to state and municipal governments, and the Main Street Loan Program for Small and Medium Businesses.
Members suggested that “in the coming months,” the Fed should provide more details on what it will take to adjust the program, which has taken the central bank’s balance sheet to more than $ 7 trillion as part of the program. efforts to support the economy during the coronavirus pandemic.
Managers favor a results-based approach that would allow purchasing to achieve certain economic objectives. The committee also noted that it would tie purchases to interest rates, with the bond buying program likely to end before rate hikes.
Market participants were anticipating a possible Fed announcement at the December meeting.
On the economy, Fed officials said they assumed no budget support program would be enacted by the end of the year. However, they said households as a whole saved enough money to support consumption until the end of the year. They also noted that tax revenues showed that the situation in most states and municipalities was not as bad as some had feared.
Still, they said the risks to the economic forecast were “on the downside, with the latest data suggesting an increased likelihood of a resurgence of the disease.”
Members “noted that economic activity and employment continued to recover but remained well below their levels at the start of the year,” the minutes said.
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