Minutes from the Federal Reserve’s latest monetary policy meeting did not do much to change the view that the central bank is likely to leave policy unchanged for the foreseeable future.
The minutes from the January meeting showed participants described the economy as “far from” achieving the Fed’s goal of maximum employment.
Participants observed that “even with a brisk pace of improvement in the labor market, achieving this goal would take some time.”
The Fed said participants generally acknowledging that the medium-term outlook for real GDP growth and employment had improved but continue to see elevated uncertainty surrounding that outlook.
“Participants noted that economic conditions were currently far from the Committee’s longer-run goals and that the stance for policy would need to remain accommodative until those goals were achieved,” the minutes said.
They added, “Consequently, all participants supported maintaining the Committee’s current settings and outcome-based guidance for the federal funds rate and the pace of asset purchases.”
The minutes said various participants highlighted the importance of the Fed clearly communicating its assessment of progress toward its longer-run goals well in advance of when it could be judged substantial enough to warrant a change in the pace of purchases.
“The minutes of the Fed’s late January policy meeting show officials still in dovish mood – willing to ‘abstract from temporary factors affecting inflation’ and focused instead on achieving the FOMC’s ‘broad-based and inclusive goal of maximum employment,” said Paul Ashworth, Chief US Economist at Capital Economics.
He added, “We doubt that the Fed will begin to taper its asset purchases until early next year and believe that the first rate hike will be delayed until 2024.”