Fed split in June on QE timing; Bernanke sees easy policy for now
Fed chairman says central bank needs to keep a stimulative monetary policy in place given low level of inflation and 7.6 per cent unemployment rate
About half of the Federal Reserve’s policymakers felt the US central bank’s bond-buying stimulus should be brought to a halt by year end when they met in June, but many wanted reassurance the US jobs recovery was on solid ground before any policy retreat.
In the end, most of the US central bank’s 19 policymakers felt it was a good idea to have Fed Chairman Ben Bernanke lay out a road map at a post-meeting news conference on how they likely would wind down the so-called quantitative easing program, minutes from the meeting released on Wednesday showed.
In doing so, Bernanke said the Fed would likely slow the pace of its bond purchases by year end, with an eye to bringing the stimulus program to a close by mid-next year.
“Several members judged that a reduction in asset purchases would likely soon be warranted,” the minutes of the June 18-19 meeting said. Even so, “many members indicated that further improvement in the outlook for the labour market would be required before it would be appropriate to slow the pace of asset purchases.”
Financial markets see-sawed after the release of the minutes as investors tried to gauge the likelihood of a near-term pullback in the Fed’s bond purchases. But stocks strengthened in after-hours trade and US Treasuries rose after Bernanke reiterated the need for monetary policy accommodation for the foreseeable future and cast doubt over the strength of the US labour market.
The Fed’s June meeting was held before the release of the government’s report on the US labour market for the month of June, which showed surprising strength.