The Federal Reserve will stay the course, reducing monthly acquisitions of Treasury notes and mortgage-backed securities (MBS) by a total of $10 billion starting in February, as revealed by the Federal Open Market Committee (FOMC) meeting minutes released Wednesday.
Specifically, the Fed will cut its purchases of long-term Treasury bonds by $5 billion to $35 billion per month, and reduce its purchases of agency MBS by $5 billion to $30 billion per month.
‘The committee's sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate,’ the minutes state.
The committee noted that its tapering is ‘not on a preset course,’ and that future decisions about the pace ‘will remain contingent on the committee's outlook for the labor market and inflation, as well as its assessment of the likely efficacy and costs of such purchases.’ Providing the labor market holds steady or improves, the Fed says it will likely continue to reduce the pace of asset purchases.
In what was Fed Chairman Ben Bernanke's last policy-setting meeting, the FOMC also reaffirmed its expectation that the current exceptionally low target range for the federal funds rate of 0% to 1/4% will be appropriate, providing unemployment remains above 6.5%.
To access the FOMC's statement, click here.