The Federal Reserve said that it is “well-positioned” to begin decreasing its holdings in May.
According to minutes disclosed Wednesday from a meeting last month, Federal Reserve officials considered decreasing the central bank’s asset holdings by as much as $95 billion per month to help curb the country’s highest inflation in almost four decades.
“All participants agreed that higher inflation and tight labour market conditions justified initiating balance sheet runoff at the next meeting, at a quicker pace than during the 2017-19 period,” FOMC members said.
“According to the minutes of the March 15-16 meeting, participants generally agreed that monthly limits of around $60 billion for Treasury securities and approximately $35 billion for agency MBS would likely be acceptable.”
When the Fed sought to cut its balance sheet last in 2017-19, the maximum reduction was limited to $50 billion, much less than the central bank is predicting this year.
The Fed is building the framework for its forthcoming meeting on May 4-5 by releasing the minutes this month, indicating traders what to anticipate in the following months, which is why the influence of the central bank’s actions may already be seen.
Stocks in the United States had already fallen in the run-up to the meeting, after many Fed officials hinted at what will be covered in the minutes.
Additionally, the minutes indicated that although the central bank announced a 25 basis point (0.25 percentage point) rate rise during its two-day March meeting, “several” members of the FOMC originally desired a half percentage point boost. They decided on a quarter-point increase in part due to the uncertainties surrounding the Ukraine conflict.
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