The US Federal Reserve policymakers appear less inclined to take further action to stimulate the economy.
Minutes released yesterday showed members of the Fed’s policymaking committee spent little time during their March 13 meeting discussing the possibility of purchasing more bonds as a way to drive down long-term interest rates and promote more borrowing and spending.
The minutes also showed that only “a couple” of members expressed support for bond purchases, given that the economy is showing signs of improvement. At the previous meeting, there was support from “a few” members for more bond purchases.
The Fed currently has 10 voting members.
Wall Street appeared disappointed by signs that the Fed is moving away from further efforts to stimulate the economy. Traders reacted by selling stocks and, more tellingly, bonds.
The yield on the 10-year US Treasury note rose to 2.29 percent from 2.16 percent. A bond’s yield moves in the opposite direction of its price.
The Dow Jones industrial average fell as much as 133 points and ended the day at 13,199, a decline of 65 points.
Since the financial crisis of 2008, the Fed has completed two bond-purchase programs that have helped to drive down rates on mortgages and other loans. They were intended to encourage lending.
“Even though Fed officials remain cautious about the economic outlook, there is little, if any, support for any new [bond-buying] program,” Paul Ashworth, chief US economist at Capital Economics, said in a note to clients.
David Jones, chief economist at DMJ Advisors, put it more bluntly: “More bond buying may still be on the table, but just barely.”
Opponents are worried that more bond purchases could stoke inflation. US consumers are already paying higher prices for gasoline.
Most economists do not think Fed officials will change their interest-rate policy at the next meeting on April 24 and April 25.
However, pressure could build for the Fed to raise rates sooner if economic growth picks up.
US consumers boosted their spending in February by the most in seven months, raising expectations that the economy grew at a stronger pace in the first quarter the year. The US Department of Commerce will release its growth estimate for the January-to-March quarter on April 27.