Federal Reserve Chairman Jerome Powell, in his early days on the US central bank's board of governors, argued frequently and forcefully for an end to the bond purchases undertaken to support the recovery from the financial crisis, transcripts of policy meetings from 2013 released on Friday showed.
Powell, who joined the board in May 2012 when Ben Bernanke was Fed chief, advocated in January 2013 for a plan to taper bond purchases, "ending them before year-end, whether or not we see a substantial improvement in the labor market," according to the transcript from that month's meeting of policymakers.
The Fed did announce a plan to slow its purchases later that year, but not before global financial markets endured months of turbulence in what has become widely known as the "taper tantrum."
Powell succeeded Janet Yellen as Fed chief in 2018. The release of the transcripts from the Fed's eight policy meetings in 2013 gives more insight into policymakers' thinking and deliberations during and after the 2007-2009 financial crisis and recession. The year 2013 marked a turning point in Fed policy as it took its first steps to end the massive support it had provided, including cutting interest rates to near zero and accumulating more than $4 trillion in bonds and mortgage-backed securities.
The bond-purchase program, known as quantitative easing and designed to keep a lid on long-term borrowing costs to help stimulate the economy, was hugely controversial and had its critics within the Fed itself.
What to do about the Fed's ballooning balance sheet stood out as the overarching debate in the US central bank's closed-door meetings that year. That same issue reverberates today, highlighting the complexity of managing its massive portfolio - and now getting rid of a large portion of it - without disrupting markets. A key source of tension, then as now, was that the Fed saw one path forward, and the markets saw something entirely different.
Last month, Powell sent markets tumbling with a message that the bond-shedding program is on "auto pilot" and then. Last week, he sent markets soaring when he said the Fed was listening to concerns and would be flexible. The taper tantrum was triggered in May of 2013 when Bernanke told lawmakers the Fed could "take a step down in our pace of purchases" in coming meetings.
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