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Fed seems on track to slow bond buys

Federal Reserve Chairman Ben Bernanke testifies before Congress

Federal Reserve Chairman Ben Bernanke testifies before Congress this past month in Washington. The Fed released its minutes on the policy makers most recent meeting. (July 17, 2013) Credit: AP

The Federal Reserve appears on track to slow its bond purchases by the end of this year if the economy continues to improve. But it remains divided over the exact timing of the move.

That's the message from the minutes of the Fed's July 30-31 meeting released Wednesday.

A few policymakers said they wanted to assess more economic data before deciding when to scale back the central bank's $85 billion a month in Treasury and mortgage bond purchases, which are intended to boost the economy. These policymakers "emphasized the importance of being patient," the minutes said.

Others said it "might soon be time" to slow the purchases, which have helped keep long-term borrowing rates near record lows.

"There's more debating than deciding," said Michael Hanson, senior economist at Bank of America Merrill Lynch. "We didn't get a strong indication that the committee broadly is prepared to taper in September." Nor did the minutes give any indication of how fast the Fed would scale back its purchases.

Since the July policy meeting, a few Fed officials have suggested the central bank could slow the bond buying as soon as September. By then, updated reports on U.S. employment and economic growth will have been issued.

The Fed is considered most likely to slow its bond buying after its September or December policy meeting, because after each one Chairman Ben Bernanke will hold a news conference and could explain such a major step.

The minutes suggested future Fed statements may provide no warning of any policy shift before it happens. Several members suggested providing advance notice might confuse stock and bond investors. "It's going to be a game-day decision," Hanson said.

In June, Bernanke signaled that the Fed would scale back its purchases later this year as long as the economy continued to improve.

Since then, investors have focused on when the Fed might begin to slow its purchases. Stocks have fallen, and the yield on the 10-year Treasury note has surged about three-quarters of a percentage point, lifting rates on mortgages and other loans. The average rate on a 30-year mortgage has risen about a full point since May to 4.4 percent.

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