YEREVAN, August 22. /ARKA/. A few Federal Reserve officials thought last month it would soon be time to slow the pace of their bond buying "somewhat" but others counseled patience, according to meeting minutes that offered little hint on when the U.S. central bank might reduce its support for the U.S. economy.
The minutes of the Fed's July 30-31 meeting, released on Wednesday, showed that almost all of the 12 members of the policy-making Federal Open Market Committee agreed changing the stimulus was not yet appropriate.
Investors are anxiously waiting to see when the Fed will start to slow its $85 billion monthly asset purchases, with most predicting September as the beginning of the end of the aggressive quantitative easing program, known as QE3.
The minutes provided few clues on the potential timing for a reduction and did not mention September specifically, but they did little to dissuade predictions.
"A few members emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases," the minutes said.
"At the same time, a few others pointed to the contingent plan that had been articulated on behalf of the committee the previous month, and suggested that it might soon be time to slow somewhat the pace of purchases as outlined in that plan."
Long-dated U.S. government bond yields rose after the minutes were released, while stocks were volatile. The dollar gained against the yen and euro.
In June, Chairman Ben Bernanke sparked an abrupt bond selloff when he said the Fed expected to trim QE3 later this year and to halt it by mid-2014. In recent days, currencies from India to Indonesia have tumbled as investors fear tighter Fed policy will starve emerging markets of investment.
The minutes on Wednesday appeared crafted to avoid such a reaction, and to give policymakers as much leeway as possible on when to act.
The Fed, which has taken unprecedented steps to help the slow and erratic U.S. economic recovery, wants to see sustainable economic growth and improvement in the labor market before it winds down the bond buying.
Policymakers have pledged to keep rates near zero at least until the unemployment rate falls to 6.5 percent, provided inflation remains under control.
According to the minutes, policymakers noted that the unemployment rate - which stood at 7.4 percent last month - had declined "considerably" since the latest round of bond buying began in September. However, there were signs of "more modest" labor market improvement, such as the large number of Americans who had given up the hunt for work.
"The tone of the minutes do not meaningfully reduce the risk of a September taper," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange Inc in Washington, noting that jobless figures for August would be crucial. –0--