Asset Price Tapering Could Come in 2021, Says FOMC

Asset Price Tapering Could Come in 2021, Says FOMC

While the United States (U.S) economy continued to progress through the first half of the year enough to begin the discussion of asset purchase tapering, the Federal Open Market Committee (FMOC) decided that it had not moved far enough to set a target date at its July 27-28 meeting, minutes of that meeting showed.

“They generally judged that the Committee’s standard of ‘substantial further progress’ toward the maximum-employment and inflation goals had not yet been met, particularly with respect to labour market conditions, and that risks to the economic outlook remained,” the minutes said.

However, the FOMC advanced its discussion beyond where it stood at the previous meeting, perhaps even beginning the taper process before the end of the year, the minutes said.

The FOMC emphasized that the start of tapering should not be interpreted as the beginning of the consideration for actual rate hikes and efforts should be made to keep the two separate.

“Looking ahead, most participants noted that, provided that the economy was to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year because they saw the Committee’s ‘substantial further progress’ criterion as satisfied with respect to the price-stability goal and as close to being satisfied with respect to the maximum-employment goal,” according to the minutes.

The outlook for inflation and employment match public comments by Fed officials, with both seen rising further and inflation retreating after the transitory factors subside.

Participants did show concern for the rising cases of delta variant of the coronavirus, even three weeks ago when those infections were not as widespread, noting that it could add uncertainty to the outlook and have an adverse effect on the economy if it is not contained.

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Asset Price Tapering Could Come in 2021, Says FOMC