Fed likely to trim bond buying in coming months

Members of the US Federal Reserve agreed last month they would likely start reducing their bond purchases in coming months if the US job market improved further.

They also weighed the possibility of slowing the purchases even without clear evidence of a strengthening job market.

The Fed’s bond purchases have been intended to keep long-term borrowing rates low to spur spending and growth.

The minutes of the October 29-30 meeting, released on Wednesday, also show that the members wrestled with how to assure investors that even after it cuts back on the US$85 billion a month in bond buys, the Fed still intends to keep its short-term rate near record lows.

At the meeting, the members made no changes in interest rate policy. But many wanted to better communicate to the public the Fed’s plans for both slowing its bond purchases and keeping borrowing rates low to encourage spending.

The discussion suggests some members were worried that investors could mistakenly assume a slowdown in bond purchases, which have kept long-term rates low, will be followed by an increase in short-term interest rates.

Stocks fell on Wednesday after the minutes indicated the Fed might be closer to scaling back its stimulus. The Dow Jones industrial average closed down 66 points.