Federal Reserve Grappling With When To End Stimulus Program

Photo Credit: DonkeyHotey New minutes from the Federal Reserve show central bank officials grappling with exactly when and how the Fed should exit from its massive stimulus efforts.

The minutes detailing talks of the Fed’s meeting at the end of January show officials trying to decide whether to continue monthly bond purchases of $85 billion, and with what exactly the Fed should be doing to support a steady but slow economic recovery.

“Several” members of the Federal Open Market Committee (FOMC) argued in January that the Fed should be prepared to vary the speed at which it is buying bonds in response to the trajectory of the economy or the effectiveness of the policy.

Currently, the Fed has committed to buying $85 billion of bonds a month until it sees either substantial improvement in the labor market or a spike in inflation. To be more precise, the FOMC has said its policies would likely remain in place until the unemployment rate fell below 6.5 percent or inflation climbed above two percent.

But the minutes show a number of participants warning that the Fed may be forced to reduce or halt those purchases well below those thresholds if further evaluation of the policy’s effectiveness and risks were to change.

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