By Yasin Ebrahim
Investing.com – Federal Reserve policymakers acknowledged that the economy continued to progress toward the threshold to begin tapering, but consensus on the timeline remained elusive.
At the conclusion of its previous meeting on July 28, the Federal Open Market Committee kept its benchmark rate in a range of 0% to 0.25% and the pace of bond purchases at a $120 billion monthly clip.
"No decisions regarding future adjustments to asset purchases were made at this meeting," The Fed's minutes showed. "Most participants judged that the Committee's standard of "substantial further progress" toward the maximum-employment goal had not yet been met."
The Federal Reserve has set a threshold of “substantial further progress” to start scaling back bond purchases.
The central bank, however, has been reticent to quantify the threshold. But Federal Reserve Chairman Jerome Powell, during his FOMC press conference in July, said the Fed's timeline and the changes to monthly asset purchases would depend on incoming data.
"[FOMC] participants expected that economy will continue to move our standard of substantial further progress [...] the timing and change of our asset purchases will depend on incoming data," Powell said last month.
The Fed chief also pointed to further progress in the labor market as a key driver of the committee's eventual decision on tapering, though admitted that there was "some ground to cover on the labor market side."
Since the July meeting, the labor market has improved as the economy generated 943,000 jobs last month. While the pace of inflation, which Powell has repeatedly said is likely to be transitory, appears to be reaching a peak.
The consumer price index in July was 0.5%, the largest decline in month-to-month inflation in 15 months.
The resurgence of Covid-19 cases, meanwhile, has also cast doubt on the pace of recovery amid recent data including retail sales for July, pointing to weakness in the consumer.
But the Federal Reserve believes it is yet too early to assess how big of an impact the Delta variant of coronavirus will have on the economy.
The minutes come just a week ahead of Powell's address at Jackson Hole symposium, where many expect the fed chief to lay out the carpet for a tapering announcement by year-end.
"We continue to expect a tapering announcement from the FOMC in Q4, most likely in December, with rising risk of November. We believe tapering will start in January and last 11 months for Treasury purchases and six months for MBS," Nomura said in a note.