Fed Favors Strategy of Raising Rates Before Selling Assets

Federal Reserve policy makers began to coalesce last month on a strategy to reverse record monetary stimulus by first ending their reinvestment policy and later raising interest rates and selling assets.

Almost all officials agreed that the “first step toward normalization” should be ceasing reinvestment of principal payments on mortgage debt that began in August, the Federal Open Market Committee said in records of its April 26-27 session, released today in Washington. A majority preferred to sell the Fed’s securities after raising short-term interest rates, and most wanted to put asset sales on a preannounced schedule while using federal-funds rate increases as an “active tool.”