By Yasin Ebrahim

Investing.com – Federal Reserve policymakers agreed the hurdle to begin tapering bond purchases had been met, though debate on how soon to raise interest rates continued to divide members, according to the minutes of the September meeting. 

At the conclusion of its previous meeting on Sept. 22, the Federal Open Market Committee kept its benchmark rate in a range of  0% to 0.25%, but indicated that it could begin scaling back its $120 billion monthly bond purchases at the next meeting.

According to Fed minutes, “Participants indicated that if the decision was made at the next meeting for tapering purchases to commence, tapering could start with the monthly purchasing calendars which begin in either mid November or mid December.”

Federal Reserve plans to stop tapering its bond-buying program of $150 billion around 2022. This would mean a monthly taper of approximately $15 billion. 

The Fed is under increasing pressure to set the foundation for future rate increases due to the persistent pace of inflation.

According to the Commerce Department, consumer prices in the United States rose 0.4% in September compared with the expected 0.3%.

Powell however has been quick in denying that Powell’s expectation of rate rises being initiated by the beginning of bond taping. 

Further positive economic data, particularly in the labor market, where unemployment continues to decline, may force the Fed’s hand. 

“There are risks of a little earlier than expected interest rate increase … as we’re likely to get good economic data that make the Fed feel more comfortable about normalising interest rates,” Eric Green, Chief Investment Officer of Equity at Penn Capital told investing.com in a recent interview.

The Fed’s most recent projections on the path of interest rates show that voting members are split on whether to raise rates in late 2022 or in 2023. 

Treasury yields are rising as bets rise on the Fed tightening its monetary policy soon rather than later. However, the economy should be able weather moderate increases in rates.

“Rates going from one and a half percent to maybe two or even two and a half percent over the next 12 months, is not going to choke off the recovery,” Green added.