Minutes show Fed ready to raise rates, shrink balance sheet soon

cnbc.com:

Federal Reserve officials set plans into motion at their most recent meeting to begin raising interest rates and shed the trillions of dollars in bonds on the central bank balance sheet, according to minutes released Wednesday.

Some officials at the meeting expressed concerns over financial stability, saying that loose monetary policy could be posing a substantial risk.

They indicated that interest rate hikes likely are on the way soon, and they said the unwind of the bond portfolio could be aggressive.

«Participants observed that, in light of the current high level of the Federal Reserve's securities holdings, a significant reduction in the size of the balance sheet would likely be appropriate,» the meeting summary stated.

The policymaking Federal Open Market Committee decided after the two-day session that it would not raise interest rates yet but strongly indicated a hike is on the way as soon as March.

Despite the seemingly hawkish tone, stocks shaved losses following the release of the minutes.

In addition to the rates talk, the committee set out procedures for how it will start unwinding its nearly $9 trillion balance sheet, which consists largely of bonds it has purchased in an effort to drive down rates and stimulate growth.

March is also the month when the asset purchase program is set to end, though some members at the meeting were hoping for a faster conclusion. Instead, the committee set forth a path in which the Fed will buy $20 billion in Treasurys over the next month and nearly $30 billion in mortgage-backed securities.

«A couple of participants stated that they favored ending the Committee's net asset purchases sooner to send an even stronger signal that the Committee was committed to bringing down