Fed Members Discuss Changes to Bond Purchase Program

November FOMC Meeting Minutes Released
Members Suggest Need to Change Bond Purchase Program
No Specific Timing Mentioned but Indicate "Will Happen Quite Soon"

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] It has been confirmed that the U.S. central bank, the Federal Reserve (Fed), discussed the possibility of changing its bond purchase program to support economic recovery at the Federal Open Market Committee (FOMC) meeting held this month.

The Wall Street Journal (WSJ) reported that in the minutes of the FOMC meeting held on April 4-5, released by the Fed on the 25th (local time), FOMC members discussed the possibility of changing the bond purchase program, although they were not close to making a specific decision.

Since June, the Fed has been purchasing $80 billion worth of U.S. Treasury securities and $40 billion worth of mortgage-backed securities each month.

The minutes stated, "Most members judged that at some point, the (bond purchase) guidance should be modified." However, the members avoided specifying the timing of the guidance modification, only mentioning that it would happen fairly soon.

The minutes also revealed that "members mentioned the possibility of changing the maturity of the Treasury securities purchased to longer-term bonds or adjusting the pace of purchases." The minutes suggested that maintaining the current purchase conditions for an extended period could also be an option. It is expected that the Fed’s direction through changes in the bond purchase program will be to prevent mortgage rates from rising.

After the November FOMC meeting, Fed Chair Jerome Powell emphasized that "at some point, we may reach the view that more needs to be done," highlighting that there are many variables that could lead to changes in the bond purchase program.

The market has been anticipating that the Fed might decide to expand bond purchases, change maturities, or extend the purchase period. CNBC reported that market participants expect an announcement regarding changes to the bond purchase program at the final FOMC meeting of the year, scheduled for December 15-16.

This perception by the Fed contrasts with earlier demands by Treasury Secretary Steven Mnuchin to end the Fed’s emergency lending programs. The Treasury announced its intention to not extend and to terminate by year-end the Fed’s corporate bond purchase program, Main Street Lending for small and medium-sized businesses, and liquidity support programs for local governments, causing controversy.

Contrary to the Treasury’s stance, Fed members appear to still see a high need for support as economic recovery is delayed. The minutes stated, "Members noted that the U.S. economy remains significantly below its pre-COVID-19 growth pace," expressing concerns about the speed of economic recovery.

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