The minutes from the June policy meeting show there is a group of several members of the committee who feel a reduction in asset purchases will soon be necessitated should the economy stay on its current path of recovery, but there is also a need for further evidence of improvement before easing up on the pedal.
The minutes also reveal some division amongst policy makers about the best way to communicate the Fed’s future intentions, with some wanting a clear message that the pace of purchases would be lowered soon, while others thought that might hamper the Fed’s flexibility to respond to economic changes, while another group 'were concerned that stating an intention to slow the pace of asset purchases, even if the intention were conditional on the economy developing about in line with the Committee's expectations, might be misinterpreted as signaling an end to the addition of policy accommodation or even be seen as the initial step toward exit from the Committee's highly accommodative policy stance.'
The minutes didn’t really offer any large surprises, with the language about expected growth in line with previous statements, and President of the St Louis Fed James Bullard’s vote of dissent on the grounds of too-low inflation already well-documented.
From the evidence, I would expect the Fed to continue with its stimulus for a little longer, erring on the side of caution in terms of waiting for further signs of improvement in employment before deciding that a reduction is warranted.
Shortly after the release of the minutes the Dow began to meander upwards, recovering to flat for the day, before slipping back -0.25% to 15,262 in the last hour of trading in New York.