The Federal Reserve tapered another $10 billion, drawing closer to the end of tapering as the economy continues to grow in the second quarter, the Federal Open Market Committee minutes on the July meeting said.
“Labor market conditions improved, with the unemployment rate declining further,” the minutes stated.
But the committee still remains cautious on the labor market. “A range of labor market indicators suggests that there remains significant underutilization of labor resources. Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow,” the minutes continued.
As a result, in August, the committee will add to its holdings of agency mortgage-backed securities at a pace of $10 billion per month rather than $15 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $15 billion per month rather than $20 billion per month.
The federal funds rate will maintain the current 0 to 1⁄4 percent target range.
During the summer, the FOMC suggested the idea of having the final reduction come in a single $15 billion reduction, or in a $10 billion reduction followed by a $5 billion reduction, which would make the final taper happen in two months in October.
Once again, Philadelphia Fed President Charles Plosser was the only member with a dissenting vote during the July meeting due to a disagreement with the language used for time calendar time on monetary policy.