Fed's March minutes imply monthly bond holding reduction of $95 trillion
The central bank’s officials “generally agreed” to roll off at most $60 billion in Treasurys and $35 billion in mortgage-backed securities (MBS), phased in over three months. The process is likely to start in May.
• The minutes suggested a more aggressive approach towards policy tightening
Minutes of the Federal Reserve’s March meeting showed that the officials have been contemplating reducing bond holdings by $95 trillion per month.
The minutes suggested that the Fed members were leaning towards more aggressive moves with respect to interest rate hikes and balance sheet reduction.
The central bank’s officials “generally agreed” to roll off at most $60 billion in Treasurys and $35 billion in mortgage-backed securities (MBS), phased in over three months. The process is likely to start in May.
With respect to interest rates, the minutes pointed towards a potential increase of 50 basis points.
“Many participants noted that one or more 50 basis point increases in the target range could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified,” the minutes said.
The minutes of the Fed’s meeting suggested that surging inflation is the reason behind the Fed’s rapid and strict policy tightening move. The officials raised their inflation outlook and lowered their growth expectations.
On Tuesday, Federal Reserve Governor Lael Brainard said the central bank needs to shrink its balance sheet “rapidly” to drive down inflation. “Inflation is much too high and is subject to upside risks,” she said.
Stocks ended lower but off their worst levels, with the tech-heavy Nasdaq Composite falling sharply for the second session in a row. The index shed around 315 points, or 2.2%, closing near 13,889 after minutes of the Federal Reserve's March policy meeting were released.
The Dow Jones Industrial Average ended with a loss of around 145 points, or 0.4%, near 34,497, while the S&P 500 slipped by 44 points or 1%. to close near 4,481.
Inputs from CNBC
