"Fed Members Must Be Well Prepared to Act... No Early Tapering Signal"

June FOMC Meeting Minutes Released

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Members of the U.S. Federal Reserve (Fed) have reached a consensus that, with the economic recovery accelerating, they may need to hasten tapering of asset purchases or interest rate hikes. However, no signals were detected indicating an imminent start to tapering.

According to CNBC and The Wall Street Journal, the minutes of the June Federal Open Market Committee (FOMC) meeting released on the 7th (local time) revealed some hints regarding interest rate hikes and tapering.

Some members argued that the conditions for tapering would occur sooner than initially expected, while others added that the FOMC should remain patient before announcing any changes to the asset purchase plan.

Some members advocated for tapering, citing faster-than-expected economic recovery and soaring inflation, but most members took the stance that more economic data should be confirmed and there was no need to rush tapering. However, a majority of members evaluated that "since the economic recovery is progressing rapidly, the committee should be well prepared for a policy transition."

The minutes stated, "Participants agreed to confirm at upcoming meetings whether progress toward the committee’s goals has been made in the economic recovery and to begin discussions on policy direction and adjustments to asset purchases." The minutes also introduced that members mentioned, "We should be prepared to adjust the pace of asset purchases in response to unexpected economic developments."

The minutes further emphasized that "members should provide sufficient signals to the market before reducing the pace of asset purchases."

CNBC described that there was little progress in tapering discussions in these minutes.

After the June FOMC meeting, the Fed announced the continuation of asset purchases and zero interest rates. Fed Chair Jerome Powell mentioned at the meeting that the first discussions on tapering had taken place, drawing attention to the content. The dot plot released after the meeting estimated that the first interest rate hike would occur in 2023, one year earlier than initially expected.

Meanwhile, the U.S. 10-year Treasury yield fell to as low as 1.31% intraday, marking the lowest level since February. Even after the release of the FOMC minutes, Treasury yields showed little change.

This content was produced with the assistance of AI translation services.