Three US Federal Reserve officials on Wednesday said they believe the US economy is gaining traction, despite a recent slowdown from severe weather, allowing the central bank to stick to its plan to wind down its massive bond-buying stimulus this year.
The comments, from the heads of the Federal Reserve banks of St Louis, San Francisco and Atlanta, freshen the message in the minutes of the Fed’s most recent policymaking meeting, also released on Wednesday, which showed many thought only a big change in outlook could disrupt further measured reductions in purchases.
Indeed, several Fed policymakers wanted to drive home the idea that their asset-purchase program would be trimmed in predictable, US$10 billion increments, according to minutes of the Fed’s Jan. 28 to Jan. 29 policy meeting.
The minutes also showed the officials were nearing a decision on how to adjust a promise to keep interest rates low for a while, including the possibility of incorporating financial stability concerns in that promise.
At the meeting, the Fed decided to make another modest cut to its bond-buying program, which now runs at US$65 billion per month.
It made the move despite weaker-than-expected job gains in December last year and turmoil at the time in emerging markets.
Participants generally “anticipated that the economy would expand at a moderate pace in coming quarters,” the minutes said. “Several participants argued that, in the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace of purchases by a total of [US]$10 billion at each [policy] meeting.”
A recent run of soft economic data since the meeting, much of it attributed to bad weather in the US, appears to have done little to change that view.
“I think a lot of this [softness] will come back out as we get into better weather patterns,” St Louis Federal Reserve President James Bullard told journalists in Washington.
San Francisco Federal Reserve President John Williams said in New York that the economy has shifted to a “healthy, stronger path” and noted there is a “high hurdle” to stop the US central bank from its plan to keep cutting its bond purchases.
Similarly, Atlanta Federal Reserve President Dennis Lockhart said the central bank would likely end its bond-buying program by the fourth quarter.