Members of the Federal Reserve's policymaking committee are split on when to end its program designed to lower interest rates while pumping more money into the economy, according to minutes from the group's December meeting.
A few members thought that so-called quantitative easing shouldn't end until the end of this year, while another group believed the program should ease or stop before 2013 closes out, the Federal Open Market Committee minutes showed on Thursday. The report did not specify how many or which members took each view.
Quantitative easing, or QE for short, is when the central bank prints more money to buy up more securities, in this case $40 billion in mortgage-backed securities and $45 billion in Treasuries each month, to drive down interest rates.
The FOMC has enacted three rounds of quantitative easing since 2008 to help boost the economy, and it expanded its current round, QE3, at the December meeting to offset the ending of another rate-reducing strategy called Operation Twist. That's where the Fed swapped short-term securities on its books for longer-term ones.
Those members who support an earlier end to QE3 were worried about the size of the central bank's balance sheet currently at $2.9 trillion, which was expanded rapidly in response to the financial meltdown and ensuing recession.
FOMC member Jeffrey Lacker voted against extending QE3 at all, saying that it was unlikely to stimulate the economy without risking higher consumer prices in the future, the minutes revealed.
Lacker was also the lone dissenter on how the group should give guidance on the federal funds rate, a benchmark that business and consumer loan rates track. Before the December meeting, the FOMC said the federal funds rate would remain where it is, near zero, until mid-2015. After the meeting, the group said the rate will remain in that range while unemployment stays above 6.5 percent.
As for the future of the fed funds rate? Thirteen members expect to raise the rate, and thus interest rates on consumer and business loans, sometime in 2015 and end that year at 1.25 percent, the minutes showed. Five preferred earlier increases either this year or next and to end 2015 between 2 percent and 4.5 percent. One very accommodating member expected to wait until 2016 before raising the rate.
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