Investing.com – Federal Reserve officials supported a plan to reduce the Fed's $4.5 trillion balance sheet this year, while most Fed members said an increase in interest rates will be needed "soon", according to the FOMC minutes released on Wednesday.
The Federal Reserve's minutes for its May meeting, reflected similar concerns expressed in its statement released in early May, when the U.S. central bank kept its benchmark rate unchanged, highlighting a slowdown in economic activity.
According to minutes, the central bank will announce cap limits on the total amount of maturing bonds it will allow to roll off each month without reinvesting.
The process will allow the central bank to gradually shrink its balance sheet, and eases concerns of investors, who were unsure whether the central bank would adopt an aggressive approach to reducing its $4.5 trillion balance sheet.
In their discussion concerning future interest rate policy, most Fed officials said a further increase in short-term interest rates will be needed "soon", should the economy remain on track, fuelling expectations that the U.S. central bank is poised to hike interest rates at its next meeting in June.
The hawkish view that a rate hike was needed soon was offset by comments from some Fed members that further signs would need to show that weakness in the first-quarter was temporary, prior to future rate hikes.
According to investing.com’s Fed rate monitor tool, expectations of a June rate hike remained at the same level prior to the release of the minutes, as 75% of traders expect the Federal Reserve to hike interest rates in June.
The US Dollar Index Futures, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell to 97.01, down more than 0.2%.
The U.S. 10-Year fell nearly 1% to 2.261, on the back of the Fed's minutes, confirming consensus among Fed officials that the U.S. central bank's balance sheet should be reduce this year.
Gold Futures turned positive but later pared gains to trade flat at $1,254.45.