Federal Reserve officials suggested that they might need to pull back their extraordinary support for the economy sooner than they had anticipated because of stronger-than-expected growth this year.
Fed officials discussing the matter at their June 15-16 Fed meeting weren’t ready to pull back yet on their $120 billion in monthly purchases of Treasury and mortgage securities, according to minutes of the gathering released Wednesday.
But they generally agreed that, “as a matter of prudent planning, it was important to be well positioned to reduce the pace of asset purchases, if appropriate, in response to unexpected economic developments, including faster-than-anticipated progress” toward the Fed’s inflation and employment goals or risks of undesirable levels of inflation or asset bubbles.
The minutes showed officials still expect recent surges in inflation to be temporary, driven primarily by bottlenecks and shortages caused by the pandemic. But some officials raised concern that inflation expectations “might rise to inappropriate levels if elevated inflation readings persisted,” the minutes said.
The minutes indicated officials will ramp up deliberations at their next meeting, July 27-28, over when and how to reduce the asset purchases.