“The Committee’s standard of ‘substantial further progress’ was generally seen as not having yet been met, though participants expected progress to continue,” according to minutes from the June 15-16 Federal Open Market Committee meeting published Wednesday. “Various participants mentioned that they expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had anticipated at previous meetings.”
The June meeting marked a turn in the central bank’s comfort with inflation risks amid heightened price pressures as the economy reopens from the pandemic, buoyed by massive monetary and fiscal-policy support.
The Fed’s New Dot Plot
Officials responded by penciling in two interest-rate hikes for 2023, according to the median of their projections, while seven of 18 wanted to raise interest rates next year. Thirteen officials viewed inflation risks were weighted to the upside, up from five in March, their forecast showed.
The central bank last month held the target range for its benchmark policy rate unchanged at zero to 0.25% — where it’s been since March 2020 as the pandemic took hold.
MBS Debate
Officials also continued monthly purchases of $80 billion of Treasuries and $40 billion of mortgage-backed securities until “substantial further progress’ was made on inflation and employment.
Policy makers discussed the MBS buying but were split on whether they should prioritize these assets when it came time to scale back buying.
“Several participants saw benefits to reducing the pace of these purchases more quickly or earlier than Treasury purchases in light of valuation pressures in housing markets,” the record noted. “Several other participants, however, commented that reducing the pace of Treasury and MBS purchases commensurately was preferable.”