Federal Reserve officials said at their last meeting that adjustments to their bond-buying program could be made soon as the central bank looks for alternative ways to support the economy.
The Fed released minutes of its November 4-5 political meeting on Wednesday. At that meeting, officials voted to keep the benchmark's short-term policy rates near zero.
Market participants have been looking through the logs to see where policymakers might stand to speed up or adjust the asset purchase program. The Fed is currently buying government bonds and mortgage-backed securities worth $ 120 billion a month. The central bank could decide to increase the purchases or extend the maturity of these bonds.
While members said the current buying pace was helping to adjust financial terms, they noted that changes could be made if necessary. However, the discussion did not include a specific date for changes, only that they could take place "fairly soon".
"Participants noted that if necessary, the committee could provide more accommodation by increasing the pace of shopping or by shifting its purchases from the Treasury to longer-term ones without increasing the size of its purchases," the minutes read. "Alternatively, if necessary, the committee could offer more accommodation by making purchases at the same speed and with the same composition over a longer period of time."
Since the meeting, several Fed officials have announced that the meeting had discussed asset purchases. An entire section of the Protocol is devoted to these discussions.
Changes in the coming months
Federal Open Market Committee officials also expressed concern about the pace of the economic recovery, noting that growth was still well below pace before the coronavirus pandemic broke out in March.
During his post-meeting press conference, Fed Chairman Jerome Powell said he felt the Fed still had enough political "ammunition" and pledged that the committee was "determined to use these powerful tools to support the economy ".
Since then, the Fed has learned that it will start 2021 without some of the guns in its arsenal, as Treasury Secretary Steven Mnuchin instructed the central bank to return the collateral received for several pandemic-era loan programs. These include corporate bond purchases, state and local government loans, and the Main Street Lending Program for small and medium-sized businesses.
Members suggested that "in the coming months" the Fed should provide more detail on what will be needed to adjust the program that brought the central bank balance sheet to over $ 7 trillion in an effort to support the economy through the coronavirus pandemic Has.
Officials advocate a results-based approach that ties purchases to the achievement of specific economic goals. The committee also noted that it would tie the purchases to interest rates, with the bond purchase program likely to end before interest rate hikes.
Market participants expected a possible announcement from the Fed at the December meeting.
Looking at the economy, Fed officials assumed no fiscal support package would be passed by the end of the year. Overall, however, households have saved enough money to support consumption until the end of the year. They also found that tax revenues showed that the situation for most states and communities was not as bad as some feared.
Still, they said the risks to the economic forecast are "tilted downwards, with the latest data suggesting an increased likelihood of the disease recurring".
Members "noted that economic activity and employment had continued to recover, but were well below their levels at the start of the year," the minutes read.