The Federal Reserve will reveal the extent of its initial discussions on reducing its $ 120 billion asset purchase program as the U.S. central bank prepares to slow the massive monetary support injected into it. the world’s largest economy during the pandemic.
Minutes from last month’s Federal Open Market Committee meeting due at 2 p.m. waited to show that Fed policymakers have begun to consider when and how to begin trimming U.S. Treasury bond and mortgage-backed securities purchases, which have been coupled with lower interest rates during the coronavirus crisis.
Some Fed officials are pushing for an early start to the “decline” process, expecting a faster labor market recovery and a more worrying jump in inflation.
But other U.S. central bankers have called for prudence to liquidate the purchase of the bond. They believe that rising inflation will be transitory, the economy is far from full employment and the pandemic is still a risk. As a result, markets may rebound with an aggressive removal of monetary support.
At the last FOMC meeting, the Fed kept its key interest rate on hold near zero, but updated its economic prospects to show stronger growth this year than initially forecast.
Fed officials also plan to tighten policy with two interest rate hikes in 2023, ahead of what was expected just three months ago. But Fed officials have warned that the predictions will be dependent on the flow of economic data, and policy guidance will come only through the FOMC statement.
Some investors have interpreted the new interest rate projections as an indication that the Fed may prove more responsive to inflationary pressures than previously forecast, causing a strong rally in U.S. government bond prices. United, which has since posted yields on the 10-year benchmark note up 1.3 percent. It is the lowest level in four months.
The 30-year ultra-long bond is now trading at about 1.9 percent, well off its 2.3 percent level seen in early June.