The Marriner S. Eccles Building houses the main offices of the Board of Governors of the Federal Reserve System. I(Photo: Jack Gruber, USA TODAY)
Some members of the Federal Reserve's policymaking committee said
last month they favored ending the Fed's bond-buying program to push
down interest rates by the end of this year or sooner, according to the
minutes of the Fed's December meeting.
The minutes, released Thursday, indicated divisions among Fed policymakers
about when its $85 billion a month in bond purchases should stop. The
Fed has has not announced an end date, saying the purchases will
continue "if the outlook for the labor market does not improve
The minutes show "a few'' members of the committee
favored ending purchases around the end of 2013 and "several" thought
the Fed should slow or stop its purchases "well before" this year ends.
Members who provided estimates on when the purchases should end were
"approximately evenly divided" between stopping them around midyear and
those who thought they should run longer, the minutes said.
stock market fell after the Fed's disclosure. The Fed's bond-buying
program has been a major boost to stocks and an insurance policy for
stock investors, said Anthony Chan, chief economist at Chase Private
Markets, a wealth-management unit of JPMorgan Chase. But the purchases
will probably continue into 2014, and the low consumer interest rates
the Fed's policy has produced will last longer, several economists said.
very low mortgage rates will stick around for a while,'' said Stuart
Hoffman, chief economist at PNC Financial in Pittsburgh. "But
certificate of deposit rates will also stay very low, for this year and
probably for several more.''
The market was disappointed by the
Fed's disclosure, and the prospect that bond purchases may wane, Chan
said. But if the Fed does back off, that would be a sign that the
economy has improved enough that even Fed members who favor aggressive
measures to promote the recovery, such as Chairman Ben Bernanke and Vice
Chair Janet Yellen, have been convinced by the better data to slow the
purchases, he said.
"It's sort of like a firetruck,'' Chan said. ``When they turn the water off it's because the fire is down.''
addition to announcing a new bond-buying program, the Fed said last
month that it would keep a key interest rate at nearly zero at least as
long as the unemployment rate was above 6.5% and inflation expectations
stayed below 2.5% a year.
The Fed left itself room to change its
plans if unemployment dipped but other signs, such as more workers
dropping out of the workforce, suggested the job market was still weak.
Fed is likely to keep buying bonds until 2014 because unemployment
won't fall fast enough this year to make the bank change direction, said
Paul Edelstein, director of financial economics at consulting firm IHS
``We expect the unemployment rate to be 7.6% in
the fourth quarter (of 2013), little changed from today's 7.7%,''
The government reports the unemployment rate for
December on Friday. Earlier on Thursday, payroll processing company ADP
reported that private-sector employers added 215,000 new jobs during
December, much more than the 140,000 economists had forecast.