Fed says it could begin ‘gradual tapering process’ by mid-November

Federal Reserve officials could begin reducing the extraordinary help they’ve been providing to the economy by as soon as mid-November, according to minutes from the central bank’s September meeting released Wednesday.

The meeting summary indicated that members feel the Fed has come close to reaching its economic goals and soon could begin normalizing policy by reducing the pace of its monthly asset purchases.

In a process known as tapering, the Fed would reduce the $120 billion a month in bond buys slowly. The minutes indicated the Fed probably would start by cutting $10 billion a month in Treasurys and $5 billion a month in mortgage-backed securities.

The target date to end the purchases should there be no disruptions would be mid-2022.

The minutes noted that “participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate.”

“Participants noted that if a decision to begin tapering purchases occurred at the next meeting, the process of tapering could commence with the monthly purchase calendars beginning in either mid-November or mid-December,” the summary said.

At the policymaking session, the committee voted unanimously to hold the central bank’s benchmark short-term borrowing rate at zero to 0.25%. That went along with the decision to hold the monthly asset purchases at a minimum $120 billion.

The committee also released the summary of its economic expectations, including projections for GDP growth, inflation and unemployment. Members scaled back their GDP projections for this year but upped their outlook for inflation and indicated they expect unemployment to be lower than earlier estimates.

In the “dot plot” of individual members’ expectations for interest rates, the committee indicated it could begin raising interest rates as soon as 2022. Markets currently are pricing in the first rate hike for next September, according to the CME FedWatch tool.

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