But several participants believe it would be “more appropriate” to reduce asset purchases “early next year”, rather than this year.
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Officials at the US Central Bank (Fed) could start reducing their support for the economy as early as this year, but they remain divided on the best time to start cutting back on the institution’s asset purchases.
For most of them indeed, “if the economy evolves as expected, it might be appropriate to start slowing down the pace of asset purchases this year,” according to the minutes of the Fed’s meeting of the 27 and July 28, published Wednesday.
However, economic conditions have deteriorated since that meeting, with the threat posed by the Delta variant being much greater.
The Fed’s announcement of its schedule to reduce asset purchases is eagerly awaited. The subject could be raised in the speech its President Jerome Powell will give from the global meeting of central bankers in Jackson Hole, Wyoming on August 26 and 27, or at the next Fed meeting on September 21 and 22.
But positions remain divergent within the members of the Monetary Committee. Those in favor of a rapid tightening of monetary conditions, highlight the risks that inflation will continue to accelerate, while more wait-and-see officials still wish to observe the evolution of economic data, particularly with regard to the Delta variant.
“Several” participants thus believe that it would be “more appropriate” to reduce asset purchases “at the beginning of next year”, rather than this year.
“A few” participants “highlighted the risks that (this) (could) delay the return to work and school and thus slow down economic recovery”.
The Fed should favor a level close to full employment, and inflation a little above 2%.
Some Fed officials have also warned of the “considerable uncertainty” that still hangs over a return to normal in the global supply chain, and difficulties in finding workers in the United States.
“These participants stressed that the Committee should be patient in evaluating progress towards its objectives and in announcing changes to its asset purchase plans,” it is further written.
On the other hand, no debate on key rates: “all members have agreed to keep (them)” within a range of 0 to 0.25%, and even expect “that it will be appropriate to (them) ) maintain ”until economic conditions are compatible with the objectives of full employment and price stability.
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