FOMC Minutes Suggest QE Tapering by Year-End
The minutes for June\’s meeting of the Federal Open Market Committee (FOMC) suggest that committee members are mostly in agreement that the current quantitative easing program (QE) should begin winding down by year end, but the committee minutes are very clear concerning the committee\’s intention to monitor inflation and ongoing economic and financial developments before taking action to reduce the current rate of QE.
The Fed currently purchases $85 billion monthly in Treasury securities and mortgage-backed securities (MBS). Investors fear that if the Fed rolls back QE too soon or too fast, it could cause long term interest rates such as mortgage rates to rise faster.
The Fed minutes indicate that factors the Fed will continue monitoring before making changes to QE include:
- Labor market conditions
- Indicators of inflationary pressures
- Readings on financial developments