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Fed Moving to September Taper Target (Update 1)

Updated from 2:24 p.m. with comment from an economist

NEW YORK ( TheStreet) -- Minutes of the Federal Reserve's June policy-making meeting showed that several members agreed the central bank should start to reduce monetary stimulus in light of improving labor conditions.

The minutes, which further detail the June meeting and subsequent policy statement, show many differing opinions among central bankers.

A growing number of analysts and economists think the Fed could be moving towards a September scaling down of asset purchases.

"It's not a done deal and there is still July/August labor market data," said Tanweer Akram, senior economist at ING Investment Management. "Provided those are decent numbers around 175,000 to 200,000 added payrolls and unemployment rate gradually continues to decline a bit, I think that those would be sufficient to begin gradual tapering of the program."

Members indicated a move to scale back asset purchases was necessary given the decline in labor unemployment and an increase in private jobs.

"Several members judged that a reduction in asset purchases would likely soon be warranted, in light of the cumulative decline in unemployment since the September meeting and ongoing increases in private payrolls, which had increased their confidence in the outlook for sustained improvement in labor market conditions," the minutes said.

Read the full statement below:

Discussion of Guidelines for Policy Normalization

In light of the changes in the System Open Market Account (SOMA) portfolio over the past two years, the Committee again discussed its strategy for the eventual normalization of the stance of monetary policy and the size and composition of the Federal Reserve's balance sheet that was released in the minutes of the Committee's June 2011 meeting. Although most participants saw this review as prudent longer-range planning, some felt that the discussion was premature. Meeting participants, in general, continued to view the broad principles set out in 2011 as still applicable. Nonetheless, they agreed that many of the details of the eventual normalization process would likely differ from those specified two years ago, that the appropriate details would depend in part on economic and financial developments between now and the time when it becomes appropriate to begin normalizing monetary policy, and that the Committee would need to provide additional information about its intentions as that time approaches. Participants continued to think that the Federal Reserve should, in the long run, hold predominantly Treasury securities. Most, however, now anticipated that the Committee would not sell agency mortgage-backed securities (MBS) as part of the normalization process, although some indicated that limited sales might be warranted in the longer run to reduce or eliminate residual holdings. A couple of participants stated that they preferred that the Committee make no decision about sales of MBS until closer to the start of the normalization process. Participants agreed that the Committee's focus continued to be on providing appropriate monetary accommodation to promote a stronger recovery in the context of price stability and so judged that additional discussion regarding policy normalization should be deferred.