MW: Fed remained divided over QE duration: minutes
Minutes released early after embargo break Tuesday
By Greg Robb, MarketWatch
WASHINGTON MarketWatch) — Federal Reserve officials remained divided over how long they should keep buying bonds, according to the minutes of the March 19-20 meeting released Wednesday.
The Fed said that one member wanted to slow the bond purchases immediately.
A few more favored slowing the purchases at midyear, with the program ending later in 2013.
Several others thought that if labor conditions improved as expected, the Fed could slow purchases “later in the year and stop them by year-end.”
Two members indicated that the purchases might well continue at the current pace at least through the end of the year.
The Fed released the minutes early after discovering that some copies had been sent by mistake to Hill staffers and trade groups on Tuesday. Read how Fed sent minutes early.
As advertised, the minutes show that Fed officials spent the majority of their time at the two-day meeting discussing the efficacy and costs of asset purchases.
The Fed has been purchasing $85 billion a month in Treasurys and mortgage-backed securities since the start of the year. They have said they would continue the program until there was a substantial improvement in labor market conditions.
Many Fed officials said any decision to reduce the pace of purchases should reflect both “an improvement in the overall outlook for labor market conditions, as implied by a wide range of available indicators, and their confidence in the sustainability of that improvement.”
A couple of Fed officials noted the pace of purchases might be increased if progress toward the central bank’s economic goals wasn’t maintained.
One important development was that “several” Fed officials spoke favorably about holding mortgage-related assets to maturity instead of selling them. Some Fed members were worried that eventual MBS sales might have a possible adverse effect on how the market functions.
Most Fed officials thought the risks and costs of additional asset purchases “remained manageable” but wanted close attention to be paid to the issues.
Greg Robb is a senior reporter for MarketWatch in Washington. Follow him on Twitter @grobb2000.
