Federal Reserve pondered more asset purchases, minutes show

Business | 26 Nov 2020 2:18 pm

At their meeting earlier this month, Federal Reserve officials discussed possible future adjustments to the central bank’s monthly bond purchases to boost the economy.

The Fed on Wednesday released minutes of its November 4-5 meeting revealing that while officials believed that no changes were needed to the bond purchase program at that time, “they recognized that circumstances could shift to warrant such adjustments.”

The Fed since June has been buying US$120 billion in bonds each month to keep downward pressure on long-term interest rates as a way of giving the economy a boost as it struggles to emerge from a deep recession.

The purchases have included US$80 billion a month in Treasury bonds and US$40 billion in mortgage-backed securities.

With the economy showing signs of slowing in the face a resurgence in coronavirus patients and a return to shutdowns in some areas, there has been market speculation that the Fed could decide to boost the size of its monthly purchases.

The minutes show that while no decision was taken on what to do or when, Fed officials were keeping their options open. Some analysts believe the Fed will make an announcement on boosting the bond purchase program at its next meeting on December 15-16, especially if there has been no movement by Congress to provide more economic relief to individuals and businesses.

The minutes said that many Fed officials “judged that asset purchases helped provide insurance against risks that might reemerge in financial markets in an environment of high uncertainty.”

The minutes released Wednesday covered the Fed’s November 4-5 meeting, held just after the November elections, and were released with the customary lag of three weeks.

At the meeting, the central bank kept its benchmark interest rate at a record low near zero and signaled that it was prepared to do more if needed to support the economy.

Federal Reserve Chairman Jerome Powell had said at a news conference following the two-day meeting that Fed officials had discussed whether and how a bond buying program might be altered to provide more economic support.-AP
 



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