WASHINGTON, July 9 (Xinhua) -- The Federal Reserve has decided
to end its asset purchase program in October if the U.S. economy
stays on track, according to the minutes of the Fed's latest
monetary policy meeting released on Wednesday.
"If the economy progresses about as the Committee expects,
warranting reductions in the pace of purchases at each upcoming
meeting, this final reduction would occur following the October
meeting," the minutes of the Fed's June 17-18 meeting said.
This is the first time the Fed has clarified the exact end date
of its open-ended asset purchase program, also known as QE3, which
was launched in September 2012 to push down long-term interest
rates and stimulate the U.S. economy.
The Fed has been trimming its asset purchase program by 10
billion U.S. dollars every policy meeting this year, as the economy
gradually picks up. The central bank is currently buying 35 billion
U.S. dollars of U.S. Treasuries and mortgage-backed securities a
The Fed is expected to continue to reduce its asset purchases by
10 billion dollars for each of its July and September policy
meetings, and end the program in the October meeting with a final
reduction of 15-billion-dollar purchases, according to the
Analysts said the end of asset purchases will have no bearing on
the timing of the first interest rate hike. The Fed has said it is
appropriate to keep its benchmark short-term interest rates near
zero "for a considerable time" after the asset purchase program
There is "no mechanical formula for what a considerable time
means," Federal Reserve Chair Janet Yellen said in a press
conference last month, adding that it depends on how the economy
progresses. Most market participants predict the central bank will
wait until mid-2015 to start raising interest rates.
The minutes showed that Fed officials had deep discussions about
how to hike interest rates when the time comes. Fed officials
generally agreed that the rate of interest on excess reserves
(IOER) that banks hold at the Fed should play a "central" role in
monetary policy normalization and set a ceiling for its target
The overnight reverse-repo facility, a measure for non-bank
institutions to make deposits at the Fed, will have an interest
rate set below the IOER rate and help firm the floor for its target
The spread would be "near or above the current level of 20 basis
points" and give the Fed adequate control over market interest
rates, the minutes said.
Most Fed officials also agreed to reinvest the proceeds of
securities that mature on its balance sheet until interest rates
had been increased.
The minutes said that the U.S. economy was "rebounding" in the
second quarter following "a surprisingly large decline in real GDP"
in the first quarter of the year.
Fed officials continued to expect the U.S. economy to expand
over the next two and a half years as a result of accommodative
monetary policy, diminished drag from fiscal restraint, further
gains in household net worth, and rising employment and wages.
The U.S. employers added 288,000 jobs in June, posting the fifth
consecutive month with job gains above 200,000, and the
unemployment rate dropped to an almost six-year low of 6.1 percent,
the latest sign that the world's largest economy is strengthening,
the Labor Department said last week. Enditem