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Fed Signals Support for Stimulus Even as Mulls Cutback (Update 2)

Updated from 12:39 p.m. ET with the S&P 500's performance and a comment from BNP Paribas' chief economist of North America

NEW YORK (TheStreet) -- The Federal Reserve voiced support for its asset buying program even as it contemplates cutting back on stimulus efforts credited with helping to bolster the S&P 500 which surged to an all-time closing high.

The Fed's guarded message came in meeting notes released earlier than intended on Wednesday after they were inadvertently made public to some 100 Congressional staffers and lobbyists.

The Fed's March 19-20 meeting came before last week's weak March jobs report, opening up the possibility that the central bankers might be less enthusiastic at their next gathering about scaling back or ending its $85 billion monthly, open-ended purchases of mortgage-backed securities and longer-term Treasuries.

"The March FOMC meeting came before the March employment report; a lot of the presumption or the notion of starting to scale back either by mid year or before year end was based on continued numbers like we had been seeing -- and remember we had very strong [U.S. economic] data in January and February," Julia Coronado, chief economist for North America at BNP Paribas, said in an interview.

The Bureau of Labor Statistics reported last Friday that March nonfarm payrolls rose just 88,000 -- economists polled by Thomson Reuters were expecting 200,000 jobs added -- and the unemployment rate ticked down to 7.6%, largely due to nearly 500,000 individuals leaving the civilian work force.

Equity markets have rallied in 2013 -- the S&P 500 rose more than 10% in the first quarter of the year -- largely helped by the Fed's monetary stimulus. Gold prices gapped up in September 2012 on news that the Fed would implement an unprecedented open-ended purchasing program, but have trended lower in most of 2013 on speculation that a growing number of Federal Open Market Committee members were pushing to scale back within the next year.

As for the early release on Wednesday, a Fed spokesperson forwarded this statement in an email: "The minutes of the March 19-20 meeting of the Federal Open Market Committee were released to the public at 9 a.m. today -- five hours earlier than scheduled. The reason is they were inadvertently sent early to a list of individuals who normally receive the minutes by email shortly after their usual release time. The individuals on the distribution list -- primarily congressional employees and employees of trade organizations -- received the minutes shortly after 2 p.m. Tuesday."

To note, members of the press who cover the Fed also receive the minutes by email shortly after their usual release time. TheStreet received the Fed's minutes by email at 9:02 a.m. -- two minutes after the central bank officially published the minutes.

The minutes of the March 19 and 20 meeting showed that "many participants" view the gradual strengthening of the U.S. labor market combined with an improving outlook for employment as evidence that the central bank should consider reducing its asset purchasing program over the next several meetings.

The minutes also showed that "a few" participants believe the costs of the central bank's current quantitative easing programs likely outweigh the benefits and said they would prefer to end the program "relatively soon." Further, "a few others" said they wanted to reduce the Fed's pace of purchases "before long."

"A few others thought that it would be appropriate for the committee to purchase securities at the current pace through the third quarter of 2013 before beginning to adjust the pace and a few saw the current rate of purchases continuing at least through the end of 2013, with two participants specifying that some purchases would likely extend into 2014," the minutes announcement said.

A couple participants, the minutes said, indicated that the Fed could achieve its dual mandate -- stable prices and maximum employment -- by tapering its purchases before the middle of 2013 or completely eliminating the programs.

St. Louis Fed President James Bullard is one voting member of the FOMC who said he would be willing to reduce the central bank's purchasing programs at a gradual pace, according to an interview he had with CNBC.

-- Written by Joe Deaux in New York.

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