Senior Economist at UOB Group Alvin Liew assessed the latest publication of the FOMC Minutes.
“There was an in-depth discussion about the FOMC’s asset purchase program in the November FOMC minutes which detailed that shifting circumstances could lead to adjustments to the pace and composition of asset purchases so as to provide more accommodation if the need arises.”
“Participants discussed plans to provide more concrete guidance on their asset purchases by linking the time frame for the program to economic conditions and that the Committee ‘might want to enhance its guidance for asset purchases fairly soon’. Most Fed officials were of the view to taper the asset buying program before raising rates (which is unlikely to happen until end of 2023).”
“While there was no indication in the November minutes that the FOMC will be modifying/updating the bond buying at their December meeting, recent developments may have changed the course of action for the next meeting.”
“We now expect more monetary easing/accommodation by the Fed from its existing tool kits, and the first in line will be the asset purchase program. As was highlighted in the minutes, we think it may come in the form of either 1) shifting its UST purchases to those with longer-maturities (without increasing the size of the overall purchases) or 2) keeping the current purchase composition but over a longer period. We expect the Fed to keep its near zero percent policy rate until at least 2023 but the Fed will not lower rates beyond zero, into negative territory. Re-visiting yield curve control is also a possibility but not in the immediate future.”
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