The News Courier in Athens, Alabama

State and Nation

July 10, 2013

Minutes of Fed policy meeting show sharp divisions

(Continued)

It was Bernanke's latest effort to stress to investors that even after the Fed has begun to slow its bond purchases, it will continue to stimulate the economy.

For one thing, the Fed plans to keep its investment holdings constant to avoid causing long-term rates to rise too quickly. It also plans to keep short-term rates at record lows at least until unemployment slides to 6.5 percent. And Bernanke has said 6.5 percent unemployment is a threshold, not a trigger: The Fed might decide to keep its benchmark short-term rate near zero even after unemployment falls that low.

Some analysts think the Fed, in the end, will back the chairman's notion of slowing its bond purchases later this year— if the outlook for the economy continues to strengthen.

The minutes suggest that a slowdown in the bond buying in September "is not quite a done deal," said Michael Hanson, U.S. economist at Bank of America Merrill Lynch. "For a taper in September, we may still need to see some more improvement in the economy."

Yet even the analysts differ. Dana Saporta, an economist at Credit Suisse, said she still thinks the Fed will start pulling back its purchases in September.

The jobs report for June, which was released Friday, "went at least some way towards satisfying those who were looking for more improvement in labor market conditions," Saporta said.

Unless the economic data significantly worsen in July and August, "it seems like most Fed officials expect tapering to begin in September," she said.

Employers added 195,000 jobs in June, and revisions showed that another 70,000 jobs were added in the previous two months. The unemployment rate was unchanged at 7.6 percent.

Fed members also struggled at last month's meeting over how best to convey the Fed's thinking about its timetable for bond purchases, the minutes showed.

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