U.S. central bankers broadly agree they can soon begin reducing their support for the economy, but are divided over how much of a threat high inflation poses, and — more importantly — what they might need to do about it.

Some indication of the intensity of that debate should emerge today when the Federal Reserve releases the minutes of its Sept. 21-22 policy meeting, at which officials sent their clearest signal yet that the days of crisis-era policy were numbered.

With the U.S. economy set to grow this year at its fastest pace in decades, inflation riding well above the Fed’s comfort zone and the labor market much healed from the devastation of the coronavirus pandemic, most U.S. policymakers believe it is prudent to start cutting back the US$120 billion in monthly asset purchases the U.S. central bank has been making to spur the economic recovery.

Fed Chair Jerome Powell said last month that, as long as the job market data are “decent,” he expects the wind-down of the Fed’s purchases of Treasuries and mortgage-backed securities to start next month and be complete by the middle of next year.

After a government report Friday showing U.S. employers added 194,000 jobs last month, well below many economists’ expectations, Fed Vice Chair Richard Clarida on Tuesday said the employment guidepost was “all but met,” though he did not point specifically to November for the start of the tapering of the asset purchases.

He repeated Powell’s forecast for the timing of the end of the “taper,” and the readout of September’s policy meeting will likely cement that view.

Most analysts expect the coming taper to be steady and “boring,” as Philadelphia Fed President Patrick Harper has put it.

Any hint in the minutes or elsewhere that U.S. policymakers plan to speed up or slow down the taper based on the pace of the economic recovery would mark a departure from the predictable pattern the Fed followed in 2014, when it tapered the bond purchases made to nurse the economy back to health after the 2007-2009 financial crisis and recession, and would be a surprise to markets.

More likely, perhaps, is that the minutes deliver new color around U.S. policymakers’ inflation outlooks, and particularly whether any feel they will ultimately have to sacrifice their goal of reaching full employment in order to prevent inflation from spiraling upward.

“I don’t think most central bank leaders think they are facing that tradeoff right now,” because they think inflation will subside, Karen Dynan, an economics professor at Harvard University, said last week. “The choice will be relevant if we get to next year and … inflation is uncomfortably high.”

Economic projections released alongside the Fed’s policy statement last month showed the U.S. central bank projecting inflation to run at 4.2 percent this year, more than double its flexible 2 percent target. The U.S. Government will release fresh inflation data early today. (SD-Agencies)