By Ann Saphir
Federal Reserve policymakers are expected next week to trim their monthly purchases of bonds by another $10 billion, putting them on track to end the massive program by October or December. So – which will it be, October or December? Some Fed officials are pushing for an answer, and soon.
“I am bothered by the fact that I don’t really know what we are going to do on that,” Narayana Kocherlakota, the dovish chief of the Minneapolis Fed, told reporters last month. “It’s another signal that we are not being as clear about our policy choices as we should be.”
If the Fed continues to taper the program by $10 billion at each meeting, monthly bond purchases will be down to $15 billion by the time of the October policy-setting meeting. Richard Fisher, the hawkish head of the Dallas Fed, told Reuters in late May, “I will vote to end it in October.”
Alternatively, the Fed could simply taper by another $10 billion in October leaving the Fed buying a “tagalong” $5 billion each month until the following meeting, in December. ”If you’re sitting around buying small amount of securities, the market sees it as the program is over,” St. Louis Fed President James Bullard told reporters last week, adding that policymakers may discuss the “official end date” of the program next week. “From a committee communication point of view, we need to send a clear message one way or another.”
Whether the Fed ends bond-buying in October or in December is, on the face of it, a small matter; after all, it will do little to change the overall size of the program, which will total $1.6 trillion when all is said and done. Still, it would be an important milestone as the Fed steers monetary policy back to more familiar waters.