Fed minutes reveal debate over inflation and Trump

On the flip side, Taiyo Yuden is down more than 3 percent, Furukawa Co.is losing nearly 3 percent and Yaskawa Electric is declining more than 2 percent.

"It would make sense to take the next step in terms of starting the normalisation process of our balance sheet", Williams told reporters on the sidelines of a conference in Frankfurt.

The minutes also showed the bank's members expected the central bank to start unwinding its balance sheet by stopping the reinvestment of payments from matured bonds.

Minutes of the Fed's discussion at its March monetary policy-setting meeting released Wednesday showed near-unanimous support for the quarter-point increase in its key interest rate, the second rate hike in three months. "Signs that the Fed could pare its balance sheet is shocking enough, but the mood was exacerbated as the Fed touched upon stock valuations, which is very rare", he added.

US stock market futures fell 0.3 percent, suggesting further weakness on Wall Street later in the day. But the minutes indicated a general view among Fed officials that if the economy remained solid as expected, a change in their policy of keeping the holdings unchanged "would likely be appropriate later this year".

The Fed's holdings of assets, including long-term debt and mortgage-backed securities, have swollen from less than $1 trillion to around $4.5 trillion since massive quantitative easing began shortly after the collapse of Lehman Brothers in 2008.

In the minutes, the Fed said it should take steps to begin trimming its $4.5 trillion balance sheet later this year as long as economic data holds up.


"Higher rates coupled with a smaller balance sheet, now at US$4.5 trillion, depict an outlook of diminishing headwinds on the dollar that could keep its longer run prospects biased higher", said Joe Manimbo, senior market analyst at Western Union Business Solutions.

The Federal Open Market Committee was almost unanimous in its vote for an increase, but debated a bit on issues like Trump's economic agenda and inflation - which, the minutes report showed, are not likely to be felt until next year. The ADP survey of USA private employment showed an increase of 263,000 jobs in March, the highest since December 2014 and ahead of estimates of 187,000.

On inflation, the minutes showed that some officials anxious that if unemployment, now at a low 4.7 percent, fell further, it could pose a "significant upside risk" of higher inflation.

With improving economic conditions, the Fed increased interest rates by 25 basis points on March 15. Unemployment is now below the Fed's 4.8 percent goal, while inflation has remained below the Fed's 2 percent inflation goal for several years.

The target range for the benchmark federal funds rate is 0.75% to 1%.

"At the same time, some participants and their business contacts saw downside risks to labor force and economic growth from possible changes to other government policies, such as those affecting immigration and trade", the minutes said.

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