QE to End in Q3

The Federal Reserve just released the minutes from its June 17-18 meeting. One surprise is that the central bank plans to end QE with a big $15 billion taper in October.

Here’s Binyamin Appelbaum in the New York Times:

The Federal Reserve intends to end its bond-buying program in October provided the economy continues to grow, according to an account published Wednesday of the central bank’s most recent policy-making meeting.

The minutes of the June meeting reflected the confidence of Fed officials that the economy had rebounded from a rough winter and their expectation that growth would continue over the next few years. But it also reflected the growing consensus that damage from the recession would continue to limit the pace of growth.

The Fed plans to add $35 billion to its holdings of Treasury and mortgage-backed securities in July, $25 billion in August and September, and a final $15 billion in October, according to the account. The Fed had previously left unclear whether it might extend the purchases by adding $5 billion in November and December.

The minutes said that ending the purchases in October rather than December was not intended to signal any change in the timing of the next step in the Fed’s retreat – the first increase in its benchmark interest rate since December 2008. Investors generally expect the Fed to start raising interest rates next summer.

This is, you know, kinda big news. On Twitter, I wondered: “Why the heck wasn’t this in the last FOMC policy statement?”

Appelbaum responded, “Really good question.”

Posted by on July 9th, 2014 at 2:24 pm


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