Fed at July meeting discussed pulling back on bond purchases

WASHINGTON (AP) — Federal Reserve officials last month discussed the timing for beginning to dial back their extraordinary support for the U.S. economy, which has been steadily recovering from the pandemic recession. They made no firm decision on a timetable but appear to be moving toward starting a pullback before year's end.

The minutes of the Fed's July meeting, released Wednesday, said it concluded that it would be appropriate to acknowledge that the economy was making progress in achieving the Fed's goals on inflation and employment. As a result, the central bank is edging toward an announcement that it will soon begin paring the pace of its Treasury and mortgage bond buying, which now amounts to $120 billion a month. These purchases have been intended to lower longer-term interest rates and encourage borrowing and spending.

“No decisions regarding future adjustments to asset purchases were made at this meeting," the minutes said. But it added that most of the Fed officials “noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year.”

While economic progress is being made, the minutes noted, Fed officials expressed concern about the threat posed by rising COVID-19 stemming from the highly contagious Delta variant.

Participants noted "that the spread of the Delta variant may temporarily delay the full reopening of the economy and restrain hiring and labor supply," the minutes said.

Based on the recent public comments of some Fed officials who favor a pullback, many economists have speculated that the central bank will announce in September a plan to begin tapering the bond buying later this year and wind it down over a period of months.

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