Federal Reserve minutes from March meeting

Federal Reserve officials indicated in their last meeting that the looser policy will remain until it produces stronger employment and inflation, and will not adjust based simply on forecasts. .

The Federal Open Market Committee released minutes from the March 16-17 meeting on Wednesday, as investors searched for clues as to where politics was headed in the future.

The summary of the meeting indicated that while officials saw the economy gain substantially, they see that much more progress is needed before ultra-easy policy changes.

Members said the $ 120 billion a month in bond purchases “was providing substantial support to the economy.”

“Participants noted that it would likely take some time for further substantial progress towards the Committee’s maximum employment and price stability goals and that, in accordance with the Committee’s results-based guidance, asset purchases would continue to less at the current rate until then. “

Adhering to the “results-based orientation” is a promise that the Fed will wait until the economy shows “additional substantial progress” toward the dual targets of full employment and inflation hovering around 2%.

The guidance is a change in Fed policy, in which it would previously adjust policy in anticipation of inflation. The minutes said members agreed that policy changes “should be based primarily on observed results rather than forecasts.”

At the meeting, the Fed’s policymaking arm voted to keep short-term loan rates anchored near zero and continue to buy at least $ 120 billion in bonds each month.

The market will get plenty of notice before the committee makes any changes, according to the minutes.

“Several participants highlighted the importance of the Committee clearly communicating its assessment of progress towards its longer-term goals well before the time when it can be considered substantial enough to justify a change in the pace of asset purchases,” summary said. “The timing of such communications would depend on the evolution of the economy and the rate of progress toward the Committee’s goals.”

In addition, the committee raised its prospects for economic growth and inflation in the future. The median outlook for GDP in 2021 was 6.5%, a big improvement over the 4.2% expectation in the December projections.

Officials also indicated that the unemployment rate could fall to 4.5% by year-end and inflation could hit 2.2%, slightly above the Fed’s traditional 2% target.

Although inflation appears 64 times in the minutes, Fed officials indicated little concern that it could become a problem anytime soon. One notion in the minutes said inflation forecasts were close to what FOMC members expected.

During a meeting with the media a few hours before the minutes were published, Chicago Fed President Charles Evans said it would take “months and months” of higher inflation “before I could have a opinion on whether this is sustainable or not. “

Heading into the March FOMC meeting, some market experts were hoping that the Fed could at least alter the duration of the bonds it has been buying to reduce a sharp rise this year in longer-term Treasury yields. .

However, Chairman Jerome Powell and other central bank leaders have said they see the rate hike as a reflection of stronger growth expectations rather than uncomfortable inflationary pressure.

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