Investing.com - The Federal Reserve will likely wind up its monthly bond-buying program in the fourth quarter of this year, likely around October, the minutes of the U.S. central bank''s June 17-18 policy meeting revealed.
The Fed is currently buying $35 billion in Treasury and mortgage debt a month to spur recovery, a monetary policy tool known as quantitative easing that aims to stimulate the economy by suppressing long-term interest rates.
The stimulus program aims to entice investors out of safe-haven asset classes like the U.S. dollar and into equities with the hope investing and hiring follow.
The Fed has gradually been trimming the amount of bonds it purchases by $10 billion a month, and by end of this year, the program should close if the Fed continues to taper on its current trajectory.
"While the current asset purchase program is not on a preset course, participants generally agreed that if the economy evolved as they anticipated, the program would likely be completed later this year," the minutes read.
"Some committee members had been asked by members of the public whether, if tapering in the pace of purchases continues as expected, the final reduction would come in a single $15 billion per month reduction or in a $10 billion reduction followed by a $5 billion reduction."
Expect that final cut to come in October if recovery continues at its current pace.
"Participants generally agreed that if incoming information continued to support its expectation of improvement in labor market conditions and a return of inflation toward its longer-run objective, it would be appropriate to complete asset purchases with a $15 billion reduction in the pace of purchases in order to avoid having the small, remaining level of purchases receive undue focus among investors," the minutes read.
"If the economy progresses about as the Committee expects, warranting reductions in the pace of purchases at each upcoming meeting, this final reduction would occur following the October meeting."
Elsewhere, the minutes revealed that monetary authorities were concerned with excessive risk-taking in the country financial markets.
Corporate bond spreads have been falling as have volatility indicators such as the VIX, which could indicate that investors are taking on risks despite the possibility of facing losses for which they might not be fully prepared.
"Signs of increased risk-taking were viewed by some participants as an indication that market participants were not factoring in sufficient uncertainty about the path of the economy and monetary policy," the minutes read.
"They agreed that the Committee should continue to carefully monitor financial conditions and to emphasize in its communications the dependence of its policy decisions on the evolution of the economic outlook; it was also pointed out that, where appropriate, supervisory measures should be applied to address excessive risk-taking and associated financial imbalances."
Still, monetary policy will remain accommodative and will promote "favorable financial conditions required to support the economic expansion."
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