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Some Fed Members Support Faster Pace of Bond Tapering: Minutes

EconomyNov 24, 2021 02:27PM ET
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© Reuters

By Yasin Ebrahim

Investing.com – Some Federal Reserve policymakers were in favor of a faster pace of bond tapering to provide the central bank with plenty of room to hike rates amid concerns about inflation pressures, the minutes of the Fed's November meeting showed on Wednesday.

At the conclusion of its previous meeting on Nov. 3, the Federal Open Market Committee kept its benchmark rate in a range of  0% to 0.25%, and said it would begin scaling back its $120 billion monthly bond purchases by $15 billion each month.

The committee said it would trim its Treasury bond purchases by $10 billion and its mortgage-backed bond purchases by $5 billion, starting this month.

But  "some participants suggested that reducing the pace of net asset purchases by more than $15 billion each month could be warranted so that the committee would be in a better position to make adjustments to the target range for the federal funds rate, particularly in light of inflation pressures," the minutes showed. 

Expectations for a ramp-up in the speed of the tapering were bolstered recently after Fed Vice Chair Richard Clarida said last week the pace of tapering would be on the agenda at the Dec. 14-15 meeting.

Fed members stressed in the November meeting that the end of tapering – expected in mid-2022 – wouldn’t automatically lead to an immediate start of liftoff in rates as the bar to hike rates is more “stringent.”

"Participants noted that beginning to scale back the pace of net asset purchases was not intended to convey any direct signal regarding adjustments to the target range for the federal funds rate. They highlighted the more stringent criteria for raising the target range, compared with the criteria that applied to beginning to reduce the pace of asset purchases," the minutes showed.

Still, there were some members who argue that if elevated inflation continues to persist, then sooner rate hikes should be on the agenda. 

Various participants backed raising "the target range for the federal funds rate sooner than participants currently anticipated if inflation continued to run higher than levels consistent with the committee's objectives," according to the minutes.

But a number of participants "stressed that a patient attitude toward incoming data remained appropriate to allow for careful evaluation of evolving supply chain developments and their implications for the labor market and inflation."

Traders are currently pricing in a first rate hike as soon as June next year, followed by a second rate hike in the November, according to Investing.com’s Fed Rate Monitor Tool.

The aggressive bets come in the wake of above-target inflation that shows little sign of the abating.

The Personal Consumption Expenditures price index, the Fed’s preferred inflation measure, was up 0.6% on October, below the 0.7% rate expected, but ahead of prior’s month 0.4%. That took the annualized rate for October to 5%, well above the Fed’s 2% target.

While many are calling for sooner rather later rate hikes to curb inflation, others warn that rate hikes tend to have a delayed impact on the economy, and could ultimately prove counterproductive to the Fed’s goals.

“Making an abrupt shift on that policy today may create an effect some 12 months 18 months down the road that could occur at a time in which the inflation effects that we know today are quite high, begin to dissipate and maybe dissipate rapidly and therefore could work counter productively toward the Fed achieving its maximum employment policy,” Mark Luschini, the chief investment strategist at Janney Montgomery Scott, told Investing.com in an interview on Tuesday.

Some Fed Members Support Faster Pace of Bond Tapering: Minutes
 

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Comments (17)
George Pichurov
George Pichurov Nov 25, 2021 12:20AM ET
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"the bar to hike rates was more “stringent.”  like ... 15% inflation?
Jokers R Us
Jokers R Us Nov 24, 2021 6:05PM ET
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Lying thieves attempting to have their cake and eat it too...all BUll$$$ manipulation they will NEVER increase taper it will be the opposite! Just more BS manipulating the DXY.
Ac Tektrader
Ac Tektrader Nov 24, 2021 5:12PM ET
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the 2017 tax giveaway to the corporations and the wealthy so far has fueled 1 trillion+ in stock buy backs and massive stock and real estate investments by the wealthy, tie that with the feds easy money monetary policy and a flight to safety by global financial interests a bubble has been created in the stock, financial and real estate markets. this problem was not created by biden he has only been in office a year. the last Administration failures to properly manage the pandemic and it's irresponsible taxing policies have helped create our current economic problems. the other piece is the feds panic response, it did not take into account the problems with massive demand with economic recovery and the use of their overwhelming suppyside response to the economic crisis created by the pandemic.
Jokers R Us
Jokers R Us Nov 24, 2021 5:12PM ET
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this was before trump lefty, before obama and bush even, this all started in 1913 with the creation of the Fed. You are not smart and never will be ciown.
CFG fdez
CFG fdez Nov 24, 2021 4:58PM ET
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We passive investors dont mind about how or when is the tappering. Just reading this for fun
Jo Pa
Jo Pa Nov 24, 2021 4:03PM ET
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The taper will be transitory.
Jo Pa
Jo Pa Nov 24, 2021 4:02PM ET
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They won't risk taper, because if the market stops going up, it'll hurt Brandon during midterms. More tax payer money will be used to prop the market up.
Empire Destroyer
Empire Destroyer Nov 24, 2021 4:02PM ET
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Most people who invest in these markets don't vote Brandon
Jokers R Us
Jokers R Us Nov 24, 2021 4:02PM ET
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Empire Destroyer WRONG...wallstreet wanted Trump OUT, they put Biden in. We are plutocracy and brandon is the puppet.
By designe
Bydesigne Nov 24, 2021 4:02PM ET
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It funny when people think wall street is anything other then the party of money. Doesn't matter whos is "power" because they are the ones who actually control things.
Ac Tektrader
Ac Tektrader Nov 24, 2021 3:37PM ET
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the fed may have no choice but to raise rates sooner than we think. the business climate will tell the tale.
Ac Tektrader
Ac Tektrader Nov 24, 2021 3:35PM ET
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the fed is walking a tight rope, still, dollar continues to strengthen global capital continues to buy US Dollars, bonds and notes. stocks are still near their highs. technically, a test of the highs in the sp500 is possible on Friday or Monday. later in the week, a possible correction could start in the stock indexes.
Jimmy Kim
Jimmy Kim Nov 24, 2021 3:18PM ET
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Should have been on going already
Stan Smith
Stan Smith Nov 24, 2021 3:17PM ET
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I'll believe it when I see it...then again even if I see it I won't believe it. Not in these days of market corruption and lies
Charlie Grgich
Charlie Grgich Nov 24, 2021 2:26PM ET
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FEd is bluffing
Empire Destroyer
Empire Destroyer Nov 24, 2021 2:26PM ET
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Ankur Vaidya bluff causes the dip, Fed and friends buy the dip and then say it's a free market
Ankur Vaidya
Ankur Vaidya Nov 24, 2021 2:26PM ET
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Empire Destroyer yeh same cases already seen in many comodity as well as all equity markets..
Invest Right
Invest Right Nov 24, 2021 2:24PM ET
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Mode talk/jawboning to soothe their billionaire friends and prevent an equities tantrum. This Fed wouldn't see inflation if it hit them in the face.
Invest Right
Invest Right Nov 24, 2021 2:24PM ET
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More*
Charlie Grgich
Charlie Grgich Nov 24, 2021 2:23PM ET
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Taper ends, market crashes, bigger QE, dollar tanks, game over
Ankur Vaidya
Ankur Vaidya Nov 24, 2021 2:22PM ET
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highly MANIPULATION.. 🤨🤨
adomas taujanskas
adomas taujanskas Nov 24, 2021 2:22PM ET
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So it is like from 16 % to 14 %? Because this is america's actual current inflation, the bastards are just printing and printing, then lying and lying.
adomas taujanskas
adomas taujanskas Nov 24, 2021 2:22PM ET
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Ankur Vaidya Look what they were doing with oil, they been reporting crude buildup for weeks and look at it now! They are tapping into emergency rezerves.
Cali Cartel
Cali Cartel Nov 24, 2021 2:22PM ET
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More like a “animals”
adomas taujanskas
adomas taujanskas Nov 24, 2021 2:19PM ET
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All they do is scale back bond purchacing a bit? Yeah, hyper-inflation ahoy!
Cihat Çiçek
Cihat Çiçek Nov 24, 2021 2:18PM ET
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if inflation is expected to drop to 2% toward the end of the year as the committee mentioned in minutes. Why bother taper or talk about interest rate hikes for next year? :)
Empire Destroyer
Empire Destroyer Nov 24, 2021 2:18PM ET
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End of the year? Man they all live in a bubble
bert prince
bert prince Nov 24, 2021 2:18PM ET
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they think salaries won't catch up inflation. what they gave during covid will be taken back via inflation
Jokers R Us
Jokers R Us Nov 24, 2021 2:18PM ET
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transitory inflation talk is transitory...inflation is part of the end game and the only way they get to keep their trillions without crashing the dollar.
 
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