U.S Fed to Reduce Balance Sheet $95bn Per Month
Members of the Federal Reserve’s monetary policy-setting committee reached a consensus at their March meeting that they would start reducing the size of the central bank’s balance sheet by $95 billion per month, minutes of the meeting Wednesday showed.
The Fed last month increased its benchmark lending rate by 25 basis points to a range of 0.25% to 0.5%, with officials indicating an aggressive stance ahead to tackle inflation, which is running at a level not seen in about 40 years, citing high economic uncertainty amid the ongoing war between Russia and Ukraine.
Minutes showed panel members “generally agreed” that a limit of about $60 billion in Treasury securities and $35 billion in mortgage-backed securities would be allowed to roll off, phased in over three months, with the reduction expected to start “as soon as in May.”
Fed officials also sharply increased their inflation outlook and lowered their economic growth expectations at the meeting.
“Many participants noted that — with inflation well above the committee’s objective, inflationary risks to the upside, and the federal funds rate well below participants’ estimates of its longer-run level — they would have preferred a 50-basis-point increase in the target range for the federal funds rate at this meeting,” the minutes said.
The minutes also showed “many participants” said one or more 50-basis-point rate increases “could be appropriate at future meetings.”
Fed officials also “generally agreed” that after balance sheet runoff was “well underway” it will be appropriate to consider selling agency MBS to enable “suitable progress” toward a longer-run System Open Market Account portfolio comprising largely of Treasury securities, the FOMC said.
“The committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the committee’s goals,” according to the minutes. The next FOMC meeting is scheduled for May 3 to May 4.
Fed’s Minutes Reinforce 50 Basis Points Rate Hike in May
The minutes of the Federal Open Market Committee’s March meeting reinforced expectations that interest rates will rise by 50 basis points in May, Pantheon said in a report on Wednesday.
The committee is “quite bullish” on growth but soaring inflation “is making them nervous,” Pantheon Chief Economist Ian Shepherdson wrote. READ: U.S Fed Hikes Interest Rates 0.25%
Members of the Federal Reserve’s monetary policy-setting committee reached a consensus at their March meeting they would start reducing the size of the central bank’s balance sheet by $95 billion per month, the minutes showed.
Panel members “generally agreed” that a limit of about $60 billion in Treasury securities and $35 billion in mortgage-backed securities would be allowed to roll off, phased in over three months, with the reduction expected to start “as soon as in May,” according to the minutes.
Shepherdson said a 25-basis-point hike in June is still more likely than a 50-basis-point increase.
#U.S Fed to Reduce Balance Sheet $95bn Per Month
