FOMC Minutes Confirm Taper Talks and Uncertainty

The minutes of the latest Federal Open Market Committee (FOMC) meeting showed that some members of the United States Federal Reserve Board indicated that the committee should begin limiting asset purchases this year.

However, 60% of respondents anticipated the first reduction in the pace of net asset purchases to come in January.

“Several others indicated, however, that a reduction in the pace of asset purchases was more likely to become appropriate early next year because they saw prevailing conditions in the labor market as not being close to meeting the Committee’s ‘substantial further progress’ standard or because of uncertainty about the degree of progress toward the price-stability goal. Participants agreed that the Committee would provide advance notice before making changes to its balance sheet policy.”

FOMC members agreed that their discussion at the meeting would be helpful background for the Committee’s future decisions about modifying asset purchases.

Moreover, the records of the July policy meeting showed that Fed officials saw high levels of uncertainty regarding many aspects of the local and global economies.

Uncertainty is seen in the progress towards the 2% inflation target, the outlook for mortgages in non-payment status, the baseline projection for economic activity, the easing of supply constraints and bottlenecks over the near term, the American economic activity, and the broader economic outlook for China.

In addition, the increased prevalence of new coronavirus variants, particularly the Delta variant, underscored the continued uncertainty about the outlook for the global economy.