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.”
“Participants noted that it would likely be some time until substantial further progress toward the Committee’s maximum-employment and price-stability goals would be realized and that, consistent with the Committee’s outcome-based guidance, asset purchases would continue at least at the current pace until then.”
The adherence to “outcome-based guidance” is a pledged that the Fed will wait until the economy shows “substantial further progress” toward the dual goals of full employment and inflation that runs around 2%. The guidance is a shift in policy for the Fed, in which it previously would adjust policy in anticipation of inflation.
At the meeting, the Federal Reserve’s monetary policymaking arm voted to keep short-term borrowing rates anchored near zero and to continue buying at least $120 billion in bonds each months.
In addition, the committee raised its outlook for economic growth and inflation ahead. The median outlook for GDP tin 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.
Investors were looking to the minutes for clues about what it would take to raise rates in the future and how members felt about possibly reducing the rate of asset purchases. Fed officials have said that even with the expected rise in inflation, they are unlikely to tighten policy until they see “substantial further progress” on their economic goals.
Heading into the meeting, some market experts had been expecting the Fed might at least alter the duration of the bonds it has been buying to tamp down a sharp rise this year in longer-dated Treasury yields.
However, Chairman Jerome Powell and other central bank leaders have said they view the rise in rates as a reflection of stronger growth expectations rather than uncomfortable inflation pressure.
This is breaking news. Please check back here for updates.
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