The minutes from the policy-setting meeting of the Federal Reserve on January 24-25 shows a board divided on whether a new bond-buying program should be launched to help give a boost to the economy.
Feds Split on Bond-Buying Option
Although there appear to be some Fed officials in favor of such a bond-buying program now, the prevalent feeling among officials is that as long as the economy seems to be making headway on its own, another program of bond-buying is not called for.
The discussion on the bond-buying option took place at the same meeting during which the Fed decided to keep its benchmark interest rate down to record lows at least until the end of 2014. One of the officials stated that the central bank might need to consider dropping that plan if it wants to keep inflation under control.
"The minutes did not show an urgency to pursue further measures, with the general tone seeming to be one of 'wait-and-see'," said Joshua Shapiro, chief U.S. economist at MFR, Inc. "So, if the economy loses steam, markets will begin to expect further action."
Economy on the Mend
Since recent statistics have demonstrated an economy in improvement mode, it is even less likely that the Fed will pursue further measures to stimulate the economy.
January’s employment statistics are one example. Last month employers added 243,000 net jobs to the economy, the most since almost one year ago. That helped reduce the unemployment rate for the fifth month in a row, down to 8.3%. Consumer borrowing increased along with car sales. US factories reported their best growth-month in at least five years.
"Given that the incoming economic data since that meeting has only been more positive … there is now little chance of the Fed launching another round of large-scale asset purchases at the meetings in either March or April," said Paul Ashworth, chief U.S. economist at Capital Economics.
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