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Real Time Insight

According to minutes of the FOMC meeting held on January 29--30, 2013, several officials are worried about the costs and risks of the Fed’s bond purchases of $85 billion every month.

While they agreed that aggressive easing measures are intended to encourage risk-taking, many members expressed concern about the "potential for excessive risk-taking and adverse consequences for financial stability”.

Most participants agreed that the asset purchases had been effective in stimulating economic activity and easing financial conditions, but “several participants emphasized that the Committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved”.

In the end, the committee voted to continue its asset purchases at the current pace, with dissent from one member who expressed concern that the potential costs and risks posed by the massive asset purchases outweighed their uncertain benefits.

A review of the efficacy and costs of the asset purchases is planned for the FOMC meeting in March.

Fed’s balance sheet could exceed $4 trillion by the end of the year if the bond purchases continue at the current pace. However disagreement among the members suggests that QE may come to an end, earlier than previously expected.

Do you think that the Fed will slow-down or stop bond purchases this year?

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