Fed officials in April cautioned about inflation pressures

FILE - In this Dec. 1, 2020, file photo, Federal Reserve Chair Jerome Powell listens during a Senate Banking Committee hearing on Capitol Hill in Washington.  Federal Reserve officials at their April 2021 meeting reaffirmed the view that the central bank's ultra-low interest rate remained the best policy approach, but some officials cautioned that some factors pushing inflation higher may not be resolved quickly. In minutes of their discussions released Wednesday, May 19, 2021 a number of participants in the discussions expressed the view that supply chain bottlenecks and input shortages that were pushing prices higher may not be resolved quickly and could end up putting upward pressure on prices beyond this year. (Al Drago/The New York Times via AP, Pool, File)
FILE - In this Dec. 1, 2020, file photo, Federal Reserve Chair Jerome Powell listens during a Senate Banking Committee hearing on Capitol Hill in Washington. Federal Reserve officials at their April 2021 meeting reaffirmed the view that the central bank's ultra-low interest rate remained the best policy approach, but some officials cautioned that some factors pushing inflation higher may not be resolved quickly. In minutes of their discussions released Wednesday, May 19, 2021 a number of participants in the discussions expressed the view that supply chain bottlenecks and input shortages that were pushing prices higher may not be resolved quickly and could end up putting upward pressure on prices beyond this year. (Al Drago/The New York Times via AP, Pool, File) (30251442A)

WASHINGTON – The U.S. economy's faster-than-expected awakening from its pandemic-induced slumber had some Federal Reserve officials last month discussing whether it might be time to start planning for easing back on one of the central bank's levers for keeping interest rates low.

The discussions, revealed in the minutes of the Fed's April meeting released Wednesday, marked the first time the central bank has even hinted that the time could be approaching to consider reducing the Fed’s $120 billion monthly bond purchases. The purchases have the effect of putting downward pressure on long-term interest rates.

Officials have been wary about broaching the subject given painful memories of the “taper tantrum” of 2013, when remarks by then-Fed Chairman Ben Bernanke about trimming bond purchases roiled financial markets and sent market interest rates briefly surging.

The minutes of the April meeting said, “A number of participants suggested that if the economy continued to make rapid progress toward the committee's goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases.”

The Fed has been so cautious that Fed Chairman Jerome Powell said at his April news conference that the Fed was not even “thinking about thinking about” trimming its bond purchases.

The comment in the Fed's minutes did not specify when talks on reducing bond purchases would begin. But it was the most explicit comment by the Fed that the better-than-expected economic performance could trigger such discussions in some future meeting.

In an effort to give the economy more of a boost, the Fed over the past year has been buying $80 billion per month in Treasury bonds and $40 billion in mortgage-backed bonds.

Kathy Bostjancik, chief U.S. financial economist at Oxford Economics, said she expects the Fed to formally announce bond tapering plans at its late-August conference in Jackson Hole, Wyoming, with the tapering of the bond purchases beginning in early 2022.