Fed Minutes Point To Discussion About Weighting Asset Purchases Toward Longer Maturities

The minutes of the Federal Reserve’s latest monetary policy meeting showed there was some discussion about weighting the central bank’s purchases of Treasury securities toward longer maturities.

A statement released after the mid-December meeting revealed the Fed plans to continue purchasing bonds at a rate of at least $120 billion per month until “substantial further progress” has been made toward its policy goals.

The minutes revealed the meeting included conversations about how the Fed would determine whether “substantial further progress” had been made.

The Fed said participants commented that the judgment would be broad, qualitative, and not based on specific numerical criteria or thresholds.

Some participants drew attention to the importance of the Fed clearly communicating its assessment of actual and expected progress toward its longer-run goals well in advance of the time when it could be judged substantial enough to warrant a change in the pace of purchases.

Regarding the pace and composition of the asset purchases, the Fed said all participants agreed to continue the purchases at the current pace and nearly all favored the current composition.

However, a couple of participants indicated that they were open to weighting purchases of Treasury securities toward longer maturities.

The minutes said some participants noted that the Fed could increase the pace of purchases or weight purchases toward longer maturities in the future if the situation called for the adjustments.

Looking ahead toward the potential end of the asset purchase program, a number of participants said the Fed should gradually taper its purchases.

At the meeting, the Fed decided to keep the target range for the federal funds rate at 0 to 1/4 percent, which is where the target range has remained since an emergency rate cut in March.

The accompanying statement reiterated that the Fed plans to keep rates at near-zero levels until labor market conditions have reached levels consistent with maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.

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