Federal Reserve preparing for taper this year, July minutes show
Federal Reserve officials at their July gathering made plans to pull back the pace of their monthly bond purchases likely before the end of the year, meeting minutes released Wednesday indicated.
However, the summary of the July 27-28 Federal Open Market Committee gathering indicated that the central bankers wanted to be clear that the reduction, or tapering, of assets was not a precursor to an imminent rate hike. The minutes noted that “some” members preferred to wait until early in 2022 to start tapering.
“Looking ahead, most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year,” the minutes stated, adding that the economy had reached its goal on inflation and was “close to being satisfied” with the progress of job growth.
However, committee members broadly agreed that employment has not met the “substantial further progress” benchmark the Fed has set before it would consider raising rates.
Addressing interest rate concerns, committee members also stressed the need to “reaffirm the absence of any mechanical link between the timing of tapering and that of an eventual increase in the target range for the federal funds rate.”
Fed officials have said repeatedly that tapering will happen first, with interest rate hikes unlikely until the process has been completed and the central bank isn’t growing its balance sheet anymore.
Markets briefly rebounded after the minutes’ release but then turned negative again, with the Dow Jones Industrial Average down more than 150 points.
The Fed is worried the rise of stablecoins could impact financial stability
Federal Reserve officials discussed the potential threat stablecoins could have on financial stability, according to minutes of the latest Fed meeting released Wednesday afternoon.
Participants at the meeting said these “new financial arrangements” appear to have “the same structural maturity and liquidity transformation vulnerabilities” as prime money funds but with less transparency.
Specifically, they “highlighted the fragility and the general lack of transparency associated with stablecoins, the importance of monitoring them closely, and the need to develop an appropriate regulatory framework to address any risks to financial stability associated with such products,” the minutes said.
Reference: CNBC
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