MNI: Fed Officials Debated Taper, MBS Buys -- June Minutes

Federal Reserve officials did not yet agree on the timing and nature of reducing the pace of QE in their June meeting but said they should be in a position to taper asset buys earlier than expected if economic conditions warranted, according to minutes of the central bank's last meeting published Wednesday.

"The Committee's standard of 'substantial further progress' was generally seen as not having yet been met, though participants expected progress to continue," the minutes said.

"Participants generally judged that, as a matter of prudent planning, it was important to be well positioned to reduce the pace of asset purchases, if appropriate, in response to unexpected economic developments, including faster-than-anticipated progress toward the Committee's goals or the emergence of risks that could impede the attainment of the Committee's goals." the report said.

There was disagreement among officials about whether or not to lead with MBS when the taper does begin, the minutes said. Former Fed officials said the central bank is likely looking at winding down its USD120 billion a month bond purchase program over 12 months, but could take a flexible approach as conditions change.

Wall Street was surprised by a hawkish shift in the Fed's projections for interest rate increases to show a median expectation for two 2023 rate hikes -- with several policymakers seeing rates lift off zero as early as next year.

Richmond Fed President Thomas Barkin told MNI last week he's like to see a stronger recovery in employment and the workforce before the Fed can taper its asset purchases.

A New York Fed adviser emphasized that message in an interview this week, indicating the Fed will stay patient on both rates and QE until the job market appears to be a more making a fulsome comeback -- including ironing out some of the mismatch issues that have cropped up post-Covid.