Fed to debate plan to bolster economy

Actions by bankers hinge on federal aid

U.S. central bankers look poised to discuss the future of the Federal Reserve’s asset-purchase program when they meet again in November, potentially heralding a shift in what they buy, or an increase in how much they purchase.

Minutes of the Federal Open Market Committee’s Sept. 15-16 meeting released Wednesday showed that “some participants also noted that in future meetings it would be appropriate to further assess and communicate how the committee’s assetpurchase program could best support” the Fed’s dual-mandate objectives.

Officials also repeated their mantra that the path of the U.S. economy would depend on the path of the coronavirus. However, the minutes suggest many officials will downgrade their already lackluster forecasts if no new agreement emerges in Washington over fiscal aid.

“Many participants noted that their economic outlook assumed additional fiscal support and that if future fiscal support was significantly smaller or arrived significantly later than they expected, the pace of the recovery could be slower than anticipated,” the minutes said.

The readiness of some officials to examine the bondbuying program signals they’d be open to altering or increasing the purchases — perhaps before the end of the year — as a way to further bolster the economy’s slowing recovery from the covid-19 pandemic. Officials would be unlikely to consider cutting purchases.

They next meet Nov. 4-5, right after the presidential election.

Policymakers agreed at the September meeting to hold rates near zero until the labor market reached maximum employment, and inflation reached 2% — and was on track to moderately exceed that goal for some time.

Forecasts also released on Sept. 16 showed officials didn’t expect the economy to reach those targets until 2023 or 2024.

U.S. central bankers, gathering virtually as a precaution against the virus, agreed to keep purchasing Treasury and mortgage-backed bonds at a combined pace of about $120 billion a month.

At upcoming meetings, officials could seek to provide more monetary policy support by increasing the amounts of Treasuries and mortgage-backed securities they buy in an attempt to lower borrowing costs for households and businesses.

Having already emphasized that overnight rates are likely to be pinned to zero for years, policymakers might also shift some current bond purchases away from securities maturing in less than three years and toward those due over longer periods. That could help lower longer- term rates without adding to overall purchase levels.