United States Federal Reserve officials may offer new guidance for asset purchases “fairly soon” as the central bank seeks to provide more support to the COVID-19 ravaged economy, according to the minutes of the Fed’s latest policy meeting released Wednesday.
“Regarding asset purchases, participants judged that it would be appropriate over coming months for the Federal Reserve to increase its holdings of Treasury securities and agency MBS (mortgage-backed securities) at least at the current pace,” said the minutes of the Fed meeting held on Nov. 4-5.
“Many participants judged that the (Federal Open Market) Committee might want to enhance its guidance for asset purchases fairly soon,” the minutes said, referring to the Fed’s policy-making committee.
“Most participants favored moving to qualitative outcome-based guidance for asset purchases that links the horizon over which the Committee anticipates it would be conducting asset purchases to economic conditions,” the minutes said.
However, a few Fed officials “were hesitant to make changes” in the near term to the guidance for asset purchases due to considerable uncertainty about the economic outlook, according to the minutes.
The minutes also showed that Fed officials continued to see the uncertainty surrounding the economic outlook as “quite elevated,” with the path of the economy highly dependent on the course of the virus.
“The economy is weakening after surging over the summer. We expect the loss in momentum to show up as a sharp slowdown in growth for the fourth quarter, then a contraction in the first quarter of 2021,” Diane Swonk, chief economist at Grant Thornton, a major accounting firm, wrote on Wednesday in an analysis.
The Fed cut interest rates to near zero at two unscheduled meetings in March and began purchasing massive quantities of United States treasuries and agency mortgage-backed securities to repair financial markets. It also unveiled new lending programs to provide up to 2.3 trillion United States dollars to support the economy in response to the coronavirus outbreak.
Earlier this month, the Fed kept its benchmark interest rate unchanged at the record-low level of near zero while making no change to its pace of asset purchases amid election uncertainty and coronavirus resurgence concerns.