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Fed flags end to balance sheet runoff, endurance rates



(Reuters) – The Federal Reserve on Wednesday announced that they would soon set a plan to stop the removal of $ 4 trillion in bonds and other assets, but policy makers confirmed further also how long their new patient "patient" the policy will last.

Today, policymakers see little risk of leaving interest rates alone as they take time to assess risk increases, including a global slowdown, according to minutes of the Fed from their January 29-30 meeting, released Wednesday.

Although some participants think that increasing rates are only needed if inflation is unexpected, "some other participants say that, as the economy grows as they expect, they will see if it is appropriate to raise the target range for the federal rate of funds later this year. "

Separate insights suggest that the central bank may have not completed its three-year campaign to raise rates of interest, but just put it in an extended pause. In January the Fed surprised markets by saying it would be a patient about adjusting its target range for short-term interest rates, now between 2.25 percent and 2.5 percent.

The notable dovish decision came amid mounting US economic dangers, including the slowing of the Chinese and European economies and a downturn from the 201

8 US tax cut.

] A raft of Fed policymakers who speak since the promise of Fed & # 39; s January of endurance says that the economy is in a good place.

But doubts remain, with entrepreneurs in futures of U.S. interest rates. which puts the bets increase that the Fed needs to mitigate the policy early next year to withstand a downturn.

The tone of the minutes is "uncertainly unpredictable," said Ward McCarthy, an economist at Jefferies LLC.

BALANCING ACT

Meanwhile, Fed policymakers seem to have coalesced around a plan to leave their balance sheet permanently larger than ever in the past, show minutes. "Almost all participants think it is desirable to declare before a plan is too long to halt Federal Reserve's holdings later this year," says the minutes.

The Fed absorbed government bonds and mortgages despite the recession of 2007-09 but the crowds of commodities reducing commodities in the last months of 2017.

FILE PHOTO: A security guard is walking in front of the Federal Reserve image after two-day policy meeting of the Federal Open Market Committee (FOMC) in Washington, DC, US on March 16, 2016. REUTERS / Kevin / File Photo

Staff research showed meeting options for "full slowing" the Fed's balance sheet runoff, "at one point in the last part of this year." The runoff is currently welcomed to $ 50 billion a month.

Bob Miller, Head of the Multi-Sector US Fixed Income at BlackRock Inc, says that he now relies on the Fed's balance plan for minutes of May's meeting, a decision on this matter in June and a stop in the Fed's runoff in October, if not July. It will help in the U.S. market conditions and markets, he said. "The fact is that the Committee has spent three consecutive policy meetings discussing the detail balance in detail, and with us indicating a minimal need to respond to questions surrounding its future," Miller said in a note .

Editing by Chizu Nomiyama and Susan Thomas

Standards: The Principles Trust of Thomson Reuters.

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