Fed members urged caution in stimulus reduction - December minutesWednesday 08 January 2014 19.26
The US Federal Reserve was confident unemployment would continue to fall even if it cut its huge monetary stimulus, according to the minutes of the December policy meeting.
However officials were also keen to steer a delicate path as they moved to scale back the massive bond-buying stimulus programme, according to the minutes.
Details of the Fed's 18-19 December policy meeting show many members of the policy-setting Federal Open Market Committee wanted to proceed with caution in trimming the asset purchases.
Most members also wanted to stress that further reductions in the programme were not on a preset course.
The US central bank ultimately surprised many investors by deciding at the meeting to cut purchases by $10 billion, bringing them to $75 billion per month, which is still an aggressive effort to clear the way for investment, hiring and economic growth.
Some of the 10 voting policymakers "expressed concern about the potential for an unintended tightening of financial conditions if a reduction in the pace of asset purchases was misinterpreted as signaling that the committee was likely to withdraw policy accommodation more quickly than had been anticipated," the minutes said.
"As a consequence, many members judged that the committee should proceed cautiously in taking its first action to reduce the pace of asset purchases and should indicate that further reductions would be undertaken in measured steps."
They also wanted to stress to the public that further reductions were "not on a preset course" and would depend on progress in the labour market and on inflation, as well as on how well the programme was judged to work in the months ahead.
"Most members agreed that the cumulative improvement in labour market conditions and the likelihood that the improvement would be sustained indicated that the Committee could appropriately begin to slow the pace of its asset purchases at the meeting," said the minutes of the Federal Open Market Committee's monetary policy meeting.