Not much support for expanding purchases of longer-term bonds at Dec Fed meeting, minutes show

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Not much support for expanding purchases of longer-term bonds at Dec Fed meeting, minutes show


Only a “couple” of the 17 top Federal Reserve officials pushed for the central bank to expand its purchases of longer-term bonds during the their meeting in December, according to minutes of the discussion released Wednesday.

The Fed has been buying $40 billion of Treasurys per month since June, with the purchases coming across the yield curve. Many economists have argued that concentrating the purchases on the long-end of the curve would add more stimulus to the economy.

The central bank is also buying $40 billion per month of mortgage-backed securities.

Ahead of the Fed meeting, many economists thought the Fed would decide to concentrate more on the longer-end of the yield curve, but the actual support for the support for the move in the meeting was small.

Fed officials “generally judged that the asset purchase program as structured was providing very significant policy accommodation,” according to the minutes.

“Some” Fed officials left open the possibility of weighing purchases of Treasurys toward the longer end if necessary, the minutes said.

A “few” officials said it was important that the Fed continue to evaluate balance of the costs and risks of the purchases against the benefits.

At the meeting, the Fed adopted guidance on the asset purchases, saying the increases in asset holdings would continue “until substantial further progress has been made toward reaching the Committee’s maximum employment and price stability goals.”

Fed officials generally said that “substantial progress” was not based on specific numerical criteria or thresholds.

Many Fed officials noted that the Fed should tell markets “clearly” its assessment of progress well in advance of the time when the central bank might change the pace of the purchases.

Looming behind this was concern about another “taper tantrum” when just a brief mention of the possibility of slowing down asset purchases by then Fed-chairman Ben Bernanke caused a rout in the Treasury market in 2013.

The Fed said that once the “progress” was achieved, it would slowly taper the purchases similar to the slow pace during the last program of 2013 and 2014.

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were higher on Wednesday but were losing ground late in the afternoon as the U.S. Capitol went into lockdown when protestors managed to get past security and enter the building.



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