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Fed: Officials feel bond buying pace is appropriate

Yahoo Finance’s Alexis Christoforous and Brian Cheung discuss the latest Fed minutes.

Video Transcript

ALEXIS CHRISTOFOROUS: And just a few minutes ago, we got the minutes from the Federal Reserve's last meeting. And our Fed correspondent Brian Cheung is here now to break that down for us. So after looking over those minutes, Brian, did you get any more clarity on the Fed's bond purchasing plans?

BRIAN CHEUNG: Well, for those that were watching that December 16 meeting, they'll recall that that was the big focal point of that meeting-- the Federal Reserve holding interest rates steady in that meeting, but saying that it would commit to continuing to buy at least $120 billion of assets per month until there was quote, "substantial further progress" towards its dual mandate of maximum employment and stable prices.

Now, of course, the question, then, is what does, substantial further progress, mean? And it seems like the minutes that we just got about eight minutes ago unpacked that a little bit more. Now, the participants broadly on the Federal Open Market Committee-- again, that policy-setting committee-- said that they wanted to make sure that they were clearly communicating exactly what that meant in the coming meetings-- that they preferred to actually keep it vague in that December meeting.

There were some differences with regards to whether or not they should have made changes to the QE program in that meeting itself. There was quote, "a couple"-- so two FOMC participants that favored longer dated purchases announced in that meeting. Of course, that didn't happen, and that wasn't the case. But there were also a number of participants that said tapering could quote, "generally follow a sequence from 2013 and 2014," which hints that they're actually looking forward ahead in time to a point in time when the Federal Reserve could start paring back on its quantitative easing programs.

So you have people on different sides of the committee kind of differing on where they think QE should be going. A lot of that is because of the trajectory of the economy. On one hand, there's the downside risks of the increasing amount of COVID cases around the world and in this country, including that new strain but then you have the upside risk of the vaccine development which is rolling out right now.

Broadly speaking, the FOMC minutes noted that they saw that vaccine news as quote, "reducing downside risk over the medium term." But they said participants still saw quote, "significant uncertainties." That will be the big tell for what they do with their quantitative easing program going forward. But again, the big thing from the minutes that were just released about 10 minutes ago, that the Federal Reserve did commit to keeping that $120 billion as a floor for those purchases, but saying we could be quite flexible with it going forward. Alexis.

ALEXIS CHRISTOFOROUS: All right. Appreciate it, Brian Cheung.