The Federal Reserve will do what it can to prevent a “taper tantrum” when it finally decides to scale back on its bond purchases, minutes from the central bank’s most recent meeting showed Wednesday.
Following a two-day session Dec. 15-16, thepolicymaking Federal Open Market Committee voted to keep its benchmark short-term interest rate anchored near zero.
Markets, though, were focused on discussion surrounding the Fed’s asset purchase program. The central bank has been buying at least $120 billion in Treasurys and mortgage-backed securities each month, and at the meeting pledged to keep doing so until it sees “substantial further progress” towards its goals regarding inflation and employment.
Minutes noted unanimous approval around the “outcome-based” approach to the program, though members noted that doesn’t mean the purchases will be tied to specific numeric goals.
Officials agreed that markets would get plenty of notice before the asset purchases were curtailed. The last time the Fed cut back on its asset purchases, it triggered a “taper tantrum” in the market that officials want to avoid this time.
“Various participants noted the importance of the Committee clearly communicating its assessment of actual and expected progress toward its longer-run goals well in advance of the time when it would be judged substantial enough to warrant a change in the pace of purchases,” the minutes said.
Members further noted that once the “substantial further progress” threshold has been reached, the tapering of purchases would be “gradual” and along the lines of what the Fed did starting in