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    Fed divided over timing for slowing its bond buying

    In June, Fed chairman Ben Bernanke signaled that the central bank would scale back its bond purchases later this year as long as the economy continued to improve.
    Charles Dharapak/Associated Press/File 2013
    In June, Fed chairman Ben Bernanke signaled that the central bank would scale back its bond purchases later this year as long as the economy continued to improve.

    WASHINGTON — The Federal Reserve appears on track to slow its bond purchases by the end of this year if the economy continues to improve. But it remains divided over timing.

    That’s the message from the minutes of the Fed’s July 30-31 meeting, released Wednesday.

    A few policy makers wanted to assess more economic data before deciding when to scale back the central bank’s $85 billion a month in Treasury and mortgage bond purchases. They ‘‘emphasized the importance of being patient.’’


    Others said it ‘‘might soon be time’’ to slow the purchases, which have helped keep long-term borrowing rates near record lows.

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    ‘‘There’s more debating than deciding,’’ said Michael Hanson, senior economist at Bank of America Merrill Lynch. ‘‘We didn’t get a strong indication that the committee broadly is prepared to taper in September.’’

    Nor did the minutes give any indication of how fast the Fed would scale back its purchases once it begins — or whether it would cut back equally on Treasurys and mortgage bonds.

    Since the meeting, a few Fed officials have suggested the central bank could slow the bond buying as soon as September. By then, updated reports on US employment and economic growth will have been issued.

    The Fed is considered most likely to slow its bond buying after its September or December policy meeting because after each one, chairman Ben Bernanke will hold a news conference and could explain such a major step.


    The Fed holds eight policy meetings a year; four include news conferences. The Fed will also meet in October.

    The minutes suggest future Fed statements may provide no advance warning of any policy shift. Several members suggested that providing advance notice might confuse investors.

    ‘‘It’s going to be a game-day decision,’’ Hanson said.

    In June, Bernanke signaled that the Fed would scale back its purchases later this year as long as the economy continued to improve. And he said the purchases would probably end by the middle of 2014, when the Fed expects the US unemployment rate to be around 7 percent. It is now 7.4 percent.

    Since then, investors have focused on when the Fed might begin to slow its purchases. Stocks have fallen on speculation the Fed is moving closer to pulling back.


    The yield on the 10-year Treasury note has surged about three-quarters of a percentage point, lifting rates on mortgages and other loans. The average rate on a 30-year mortgage has risen about a full point since May to 4.4 percent.

    The minutes released Wednesday show policy makers agreed they won’t raise the short-term interest rate they control from a record low near zero at least until the unemployment rate falls to 6.5 percent. Several said they were willing to lower that threshold.

    The minutes showed that some policy makers were less confident than they were at their June meeting that economic growth will pick up this year. They cited higher mortgage rates, slower growth overseas, and the potential for continuing cuts in government spending as the main reasons.

    But several said they thought the housing market would continue to recover despite higher interest rates. If so, that would provide an important boost to the economy. Those Fed officials, who aren’t identified, said banks have become more willing to provide mortgages, consumer confidence has increased, and mortgage rates are still low by historical standards.

    Fed officials generally agreed that the risks of an economic downturn have diminished.

    Since the meeting, the data on the job market have been mixed. Employers added 162,000 jobs in July. That was the fewest in four months. Still, the economy has created an average of 192,000 jobs a month this year, slightly ahead of last year’s pace.

    Much of the job growth has been because the number of people seeking unemployment benefits has fallen to its lowest level in five years. That suggests companies are laying off few workers and may step up hiring in coming months.

    The economy is still expanding at a sluggish pace, however, raising concerns about whether companies will remain confident enough to keep hiring. The economy grew at an annualized pace of just 1.7 percent in the April-June quarter.

    The Commerce Department will update its estimate of second-quarter growth next week. Many economists expect it to be revised to above 2 percent.