Minutes show concern among Fed officials over bond purchases

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Posted: Thursday, February 21, 2013 12:00 am

Several Federal Reserve policymakers said the central bank should be ready to vary the pace of its $85 billion in monthly bond purchases amid a debate over the risks and benefits of further quantitative easing.

The officials “emphasized that the committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved,” according to the minutes of the Federal Open Market Committee's Jan. 29-30 meeting released Wednesday in Washington.

The minutes showed policymakers were divided about the strategy behind Chairman Ben Bernanke's program of buying bonds until there is “substantial” improvement in a U.S. labor market burdened with 7.9 percent unemployment, with some saying an earlier end to purchases might be needed, and others warning against a premature withdrawal of stimulus.

The committee at its January meeting decided to continue buying $45 billion a month of Treasuries and $40 billion in mortgage debt without setting a limit on the duration or total size of the purchases. Policymakers also affirmed their pledge to keep the target interest rate near zero “at least as long” as unemployment remains above 6.5 percent and inflation is projected to be no more than 2.5 percent.

A number of officials said that their evaluation of costs and benefits of the policy “might well lead the committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred,” according to the minutes.

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