Federal Reserve officials broadly agreed last month they should start reducing emergency pandemic support for the economy in mid-November or mid-December, even as the delta variant continued to create headwinds.

“Participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate,” minutes of the Sept. 21-22 Federal Open Market Committee meeting released Wednesday said.

“Participants noted that if a decision to begin tapering purchases occurred at the next meeting, the process of tapering could commence with the monthly purchase calendars beginning in either mid-November or mid-December.”

Fed officials last month left interest rates near zero but signaled they were close to beginning to scale back their US$120 billion in monthly asset purchases. Chair Jerome Powell told reporters during a post-meeting press conference the process could start as soon as November and would likely end around mid-2022. 

“The minutes make it clear that the Fed will announce tapering at the next FOMC meeting, on Nov. 2-3, unless disaster strikes,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Investors took the minutes in their stride. Stocks rose while the yield on 10-year Treasuries declined and the two-year rate -- which is more sensitive to policy moves -- rose.

The record of the closed-door debate showed U.S. central bankers grappling with high uncertainty on both sides of their mandate for full employment and stable prices.


Officials discussed an illustrative tapering path: “The path featured monthly reductions in the pace of asset purchases, by US$10 billion in the case of Treasury securities and US$5 billion in the case of agency mortgage-backed securities.”

Fed officials commented that the path “provided a straightforward and appropriate template” they might follow, according to the minutes.

Inflation is rising at the fastest pace in years and is well above the Fed’s 2 per cent goal. Some officials say supply bottlenecks and production tangles -- blamed on disruption as the economy reopens from the pandemic -- could sustain price pressures for longer than they expected. Consumer prices rose 5.4 per cent in September from a year earlier, the Labor Department reported Wednesday.

“Most participants saw inflation risks as weighted to the upside because of concerns that supply disruptions and labor shortages might last longer and might have larger or more persistent effects on prices and wages than they currently assumed,” the minutes said.


In addition, Fed staff said risks had worsened, including the possibility that “longer-run inflation expectations would move appreciably higher and lead to persistently elevated inflation.”

Fed officials last month projected price pressures would ease back close to their goal next year, but nine of 18 forecast at least on interest-rate increase during 2022, up from seven in June. The FOMC left rates near zero and said they would stay there until the labor market has reached maximum employment and inflation was on track to exceed 2 per cent “for some time.”

“Various participants stressed that economic conditions were likely to justify keeping the rate at or near its lower bound over the next couple of years,” the minutes said. “In contrast, a number of participants raised the possibility of beginning to increase the target range by the end of next year,” because they saw the thresholds for liftoff potentially being met by that time.