Federal Reserve officials indicated at their last meeting that easy policy will stay in place until it produces stronger employment and inflation, and won’t be adjusted based merely on forecasts.
The Federal Open Market Committee on Wednesday released minutes from the March 16-17 meeting as investors looked for indications about where policy may be heading in the future.
The meeting summary indicated that while officials saw the economy gaining substantially, they see much more progress needed before ultra-easy policy changes.
Members said the $120 billion a month in bond purchases “were providing substantial support to the economy.”
Markets reacted little to the news, though some questioned whether the Fed needs to continue its historically accommodative policy stance.
At the meeting, the Fed’s policymaking arm voted to keep short-term borrowing rates anchored near zero and to continue buying at least $120 billion in bonds each month.
The market will get plenty of notice before the committee makes any changes, the minutes said.
In addition, the committee raised its outlook for economic growth and inflation ahead. The median outlook for GDP in 2021 went to 6.5%, a big upgrade from the 4.2% expectation in the December projections.
Officials also indicated that the unemployment rate could fall to 4.5% by the end of the year and inflation could run to 2.2%, slightly above the Fed’s traditional 2% target.
Though inflation shows up 64 times in the minutes, Fed officials indicated little concern that it might become a problem anytime soon. One notion in the minutes said that inflation forecasts were right around where FOMC members expected.
Reference: CNBC
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