Fed Minutes Reveal QE3 Debate

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According to the minutes of the Federal Open Market Committee (:FOMC) meeting held on March 19-20, 2013, released this morning, many members remained concerned about costs and risks of the Fed’s bond purchases of $85 billion every month.

Most of them agreed that the program should continue at the current pace at least through midyear, while a few others thought it would be appropriate to continue purchases at the current pace through the third quarter or end of 2013.

Most participants agreed that the asset purchases had been effective in stimulating economic activity and that the benefits continued to exceed the costs, but a couple of participants thought that the central bank should begin to taper the purchases before midyear or end the purchases altogether.

Only one FOMC member—Esther George dissented against the final vote, as she thought that the policy was too accommodative and was posing risks to the Fed’s economic objectives.

However, the committee’s discussions were based on improving labor market earlier this year, while the March payroll report released after the meeting showed that the labor market was still weak. Some of the other economic reports released recently also have been soft.

Given weaker than expected data, Fed would probably continue the asset purchases at current levels at least for the next couple of quarters.

The minutes were released in the morning instead of 2 pm EST as scheduled, as some of copies were accidentally sent out yesterday.  The committee also released economic projections by its members along with the minutes.

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