WASHINGTON — The Federal Reserve appears on track to slow its bond purchases by the end of this year if the economy continues to improve. But it remains divided over the exact timing of the move.
That’s the message from the minutes of the Fed’s July 30-31 meeting released Wednesday.
A few policymakers said they wanted to assess more economic data before deciding when to scale back the central bank’s $85 billion a month in Treasury and mortgage bond purchases. Others said it “might soon be time” to slow the purchases, which have helped keep long-term rates near record lows.
Since the July policy meeting, a few Fed officials have suggested the central bank could slow the bond buying in September. By then, updated reports on U.S. employment and economic growth will have been issued.
The Fed is considered most likely to slow its bond buying after its September or December policy meeting because after each one, Chairman Ben Bernanke will hold a news conference and could explain such a major step.
The Fed holds eight policy meetings a year; four include news conferences by the chairman. Besides September and December, the Fed will also meet in October before the year ends.
In June, Bernanke signaled the Fed would scale back its purchases later this year as long as the economy continued to improve. And he said the purchases would likely end by the middle of 2014, when the Fed expects the unemployment rate to be around 7 percent. It’s now 7.4 percent.
Since then, investors have focused on when the Fed might begin to slow its purchases. Stocks have fallen on speculation that the Fed is moving closer to pulling back on the bond buying.
The yield on the 10-year Treasury note has surged about three-quarter of a percentage point, pushing up rates on mortgages and other loans. The average rate on a 30-year mortgage has risen about a full point since May to 4.4 percent.
The minutes released Wednesday show that Fed policymakers agreed that they wouldn’t raise the short-term interest rate they control from a record low near zero at least until the unemployment rate fell to 6.5 percent. Several members even said they were willing to lower that threshold.
The release of the minutes initially rattled Wall Street as investors digested members’ thoughts on the bond purchases, the short-term rate policy and the Fed’s characterization of the economy.
The Dow Jones industrial average had been down about 50 points before the minutes were released at 2 p.m. It fell more than 100 points afterward but recovered later to post slight gains.