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Fed Sees Taper in Mid-November, Mid-December Minutes Show

EconomyOct 13, 2021 02:26PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – Federal Reserve policymakers said the central bank could taper its monthly bond purchases in mid-November or mid-December, but debate on how soon to hike rates continues to divide members, according to the minutes of the September meeting. 

At the conclusion of its previous meeting on Sept. 22, the Federal Open Market Committee kept its benchmark rate in a range of  0% to 0.25%, but indicated that it could begin scaling back its $120 billion monthly bond purchases at the next meeting.

"Participants noted that if a decision to begin tapering purchases occurred at the next meeting, the process of tapering could commence with the monthly purchase calendars beginning in either mid-November or mid-December," the Fed minutes showed.

The Federal Reserve is aiming to end the taper of its bond buying program around mid-2022, pointing to a taper of about $15 billion per month. 

"The path featured monthly reductions in the pace of asset purchases, by $10 billion in the case of Treasury securities and $5 billion in the case of agency mortgage-backed securities," according to the minutes. 

But the ongoing pace of inflation has piled pressure on the Fed to begin laying out the groundwork for rate hikes. Fed members are divided on when to hike rates amid differing views on when the labor market is likely to reach the central bank's threshold of maximum employment.

Some members believe it would appropriate to keep rates at or near their lower bound over the next couple of years. But a number of participants  "raised the possibility of beginning to increase the target range by the end of next year because they expected that the labor market and inflation outcomes specified in the Committee's guidance on the federal funds rate might be achieved by that time," the minutes showed. "Some of these participants saw inflation as likely to remain elevated in 2022 with risks to the upside" 

Further positive economic data, particularly in the labor market, where unemployment continues to decline, may force the Fed’s hand. 

“There are risks of a little earlier than expected interest rate increase … as we're likely to get good economic data that make the Fed feel more comfortable about normalizing interest rates,” Eric Green, chief investment officer of equity at Penn Capital told investing.com in a recent interview.

The rise in Treasury yields that will likely follow the tightening of monetary policy is unlikely to derail the economy.  “Rates going from one and a half percent to maybe two or even two and a half percent over the next 12 months, is not going to choke off the recovery,” Green added. 

Fed Sees Taper in Mid-November, Mid-December Minutes Show
 

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Comments (17)
Sha Alam Khan
Sha Alam Khan Oct 14, 2021 5:34AM ET
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hi frind how are you all..im new plz help me
Jokers R Us
Jokers R Us Oct 13, 2021 8:04PM ET
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Then it becomes end of november, then mid december, then end of december, then middle of january, end of january, rinse and repeat
Richard Ash
Richard Ash Oct 13, 2021 7:32PM ET
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if tapering continues everything is being supported by falsehoods. Interest rates need to rise. If they stay low what do we have to combat the next time……. The sharemarkets needs to stand on its own 2 feet.
Bipin Kochar
Bipin Kochar Oct 13, 2021 6:02PM ET
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China today accounts for over 50% of metals production and nearly 50% of the world's consumption of coal. The sharp upsurge in China's energy crisis has resulted in the massive surge in coal and gas prices - sharply pushing up the cost of smelting steel, aluminum and other metals. No amount of interest rate hikes will curtail the demand (and prices) of coal and metals. Unless the world is able to boost mining of coal, the prices of coal and metals will remain elevated - only a globally coordinated cutback on infrastructure will reduce the demand for metals (thus for coal and natural gas) and bring down prices for coal, natural gas and metals which is responsible for the surge in inflation. For the US, this would mean scrapping the infrastructure bill - which seems to be the only item that the Democrats and Republicans agree on. That said, cutback in purchased of mortgage back securities will definitely help to tame soaring property prices.
Anas Plus
Anas Plus Oct 13, 2021 5:36PM ET
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too much debt no limits
James Victorino
James Victorino Oct 13, 2021 4:45PM ET
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I am thinking tapering will occur in mid-November.  By then, the Fed regional presidents would have sold their holdings to avoid any loss.
Hank Reardon
Hank Reardon Oct 13, 2021 4:45PM ET
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And probably will have fled the country.
hamid reza binandeh
hamid reza binandeh Oct 13, 2021 2:55PM ET
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thank you
Francesco Lucchesi
Francesco Lucchesi Oct 13, 2021 2:49PM ET
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they won't taper because the job creation isn't there
Jack Hoodie
Jack Hoodie Oct 13, 2021 2:49PM ET
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cut off money for the people and they will all be waiting on the line to fill a job application
Nugroho Rahmat Fitriyanto
Nugroho Rahmat Fitriyanto Oct 13, 2021 2:49PM ET
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trust me, they will
Jokers R Us
Jokers R Us Oct 13, 2021 2:49PM ET
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end the fed to save the American economy and freedom
Rodney Dangerfield
Rodney Dangerfield Oct 13, 2021 2:49PM ET
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Jack Hoodie either that or they'll be waiting in line to cut off something just ask King Louis XVI
Dave Jones
Dave Jones Oct 13, 2021 2:48PM ET
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never happen
gagan jain
gagan jain Oct 13, 2021 2:46PM ET
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nothing happening in the near future
Bill Ackman
Bill Ackman Oct 13, 2021 2:42PM ET
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“Could” happen since June xDDDD
Michael Hartmann
Michael Hartmann Oct 13, 2021 2:35PM ET
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The desperate market manipulation is laughable. But we bet keep this market up, forgot about everything else....
Sara Sara
Sara Sara Oct 13, 2021 2:27PM ET
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sara
Usman Ontop
Usman Ontop Oct 13, 2021 2:22PM ET
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how are you
Azee Khan
Azee Khan Oct 13, 2021 2:17PM ET
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lol what a waste ...
Thomas Read
Thomas Read Oct 13, 2021 2:15PM ET
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stagflation he we come
James Vandervest
James Vandervest Oct 13, 2021 2:12PM ET
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LMAO  this is the worst kind of manipulation- the economy is coming apart at the seams literally.
 
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