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FOMC minutes show strong bias toward early taper of QE


Minutes of the Federal Reserve's last policy board meeting released Wednesday showed a significant bias toward winding up the QE stimulus program before the mid-2014 target announced by Fed chief Ben Bernanke.

But the Federal Open Market Committee was still largely focused on the pace of reducing unemployment, the minutes showed, amid increased speculation over when the $85 billion-a-month bond-buying program will be drawn down.

"About half" of the participants in the June 18-19 FOMC meeting thought the QE stimulus program should be wound up by the end of this year, the minutes said.

Yet, it noted, "many members indicated that further improvement in the outlook for the labor market would be required" before reducing in the asset purchases would be merited.

The minutes showed the committee remained divided on the trajectory of its key policy for helping the economy, the quantitative-easing bond purchases that aim to hold down longer-term interest rates.

But the split was not a big one, over a matter of just about six months: ending the program by the end of this year, or, as Bernanke forecast after the meeting, by the middle of 2014.

The minutes showed the policy makers were particularly concerned about the market speculation and possible misinterpretation over what the central bank would do with monetary policy, with bond yields having shot up a full one percentage point in the six weeks before the meeting.

There was much discussion stressing the need for Bernanke to emphasize that any QE tapering depended on the economy continuing to improve steadily in line with FOMC forecasts.

But a growing minority on the panel were also arguing for an early tightening of monetary policy to keep any potential inflationary pressures under control, after five years of the Fed's easy-money stance.

While most of the central bank's policy makers say it should stick to its ultra-low interest rate policy through 2015, four thought the benchmark federal funds rate should be increased this year or next year.

Three of those four believed the FOMC needs to act "relatively soon" in order to keep a control on possible inflation.