June Fed Minutes Hint at Balance Sheet Announcement Within Months

The Federal Reserve’s most recent interest rate hike came amid worries that keeping policy loose was posing increasing risks to financial stability and the economy.

Fed officials indicated a determination to continue raising rates even with muted inflation levels, which they considered to be temporary and likely to rise over the long run to a targeted level of 2 percent, according to a summary from the June meeting of the policymaking Federal Open Market Committee.

The Fed raised its benchmark rate target a quarter point at the meeting and outlined a plan to reduce its $4.5 trillion balance sheet of bond holdings it accrued while trying to stimulate the economy during and after the financial crisis. Meeting minutes released Wednesday indicated that Fed officials believe the balance sheet can be reduced with “limited” disruption to financial markets.

Officials also expressed little concern that low inflation would persist.

However, Fed officials were divided on when the balance sheet runoff should begin, and did not release a timetable on when it would happen.

Recent readings below the Fed’s 2 percent goal were attributed to “idiosyncratic factors, including sharp declines in prices of wireless telephone services and prescription drugs, and expected these developments to have little bearing on inflation over the medium run.”

via CNBC

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