US Fed Hints at Tapering in 'Coming Months'

Minutes from the latest meeting of the US Federal Reserve suggest the central bank plans to start tapering down its massive asset buyback programme over the next few months.

The participants in the meeting "generally expected that the data would prove consistent with the Committee's outlook for ongoing improvement in labour market conditions and would thus warrant trimming the pace of purchases in coming months," according to the minutes.

The minutes also noted that the US policymaker might "slow the pace of purchases at one of its next few meetings."

The officials also debated whether to scale back the Fed's $85bn (£53bn, €63bn) a month bond buying programme without convincing improvement in the job market. Meanwhile, a couple of participants observed that "more time was needed to assess the outlook for the labour market and inflation".

Meanwhile, James Bullard, president of the St. Louis Federal Reserve Bank, said the Fed would begin to scale back bond buying at its meeting in December, given that the job data for November is strong.

"It is definitely on the table, but it is going to depend on the data," he said.

"A strong jobs report, I think, would increase the probability of a December taper."

The Fed had launched its massive repurchasing of Treasury bonds and mortgage-backed securities in order to stimulate the recession-hit economy with lower interest rates and better job growth.

After the economy showed signs of recovery, economists expected the central bank to begin tapering its buyback programme in September. Nevertheless, the Fed delayed the move as it sought clearer evidence for an economic recovery.

In October, the central bank maintained the pace of its asset purchase, partly due to the government shutdown that delayed the release of major economic data.

"The recovery in the housing sector slowed somewhat in recent months, and fiscal policy was restraining economic growth," the minutes said.

Other Ways to Help Economy

In addition to its plans for tapering, the Fed said it is seeking ways to keep borrowing costs as low as possible in the future.

There was a proposal in the meeting to include a formal declaration in the policy statement that the Fed is likely to keep short-term interest rates at relatively low levels, even after it eventually decides to end the long period of near-zero interest rates.

The Fed intends to keep interest rates near zero at least as long as the unemployment rate remains above 6.5%. The official unemployment rate currently stands at 7.3%.

The latest minutes suggest that the Fed is unlikely to raise interest rates all of a sudden, even if it reaches the employment target. The minutes show the Fed plans to consider other factors before raising rates.

"After the unemployment threshold is crossed, many other indicators become relevant to a comprehensive judgment of the health of the labor market, including such measures as payroll employment, labor force participation and the rates of hiring and separation," said Fed chairman Ben Bernanke.