Danielle DiMartino Booth, a former adviser to the Federal Reserve Bank of Dallas, said that once the central bank starts to cut its bond holdings, the chances of a rate hike also are reduced.
Fed officials have indicated they will begin to reduce the central bank’s $4.5 trillion of Treasury and mortgage debt. The debt was bought from banks for several years after the 2008 financial crisis as a way of pushing down interest rates to help the economy recover. Interest rates fall as bond prices rise.
The central bank on Wednesday published notes from its May meeting that said “most” members of the Federal Open Market Committee showed a willingness to hike interest rates again “soon.” The pace of rate hikes was open for debate.
“Most participants judged that if economic information came in about in line with their expectations, it would soon be appropriate for the Committee to