Federal Reserve officials remained heavily engaged in a political stance at their meeting earlier this month, saying that rates are likely to remain unchanged well into the future.
Minutes of May 1-2 The UN Open Market Committee meeting also showed that members raised their expectations for growth throughout the year and said previous concerns they had had about a slowdown had fallen. In spite of their general optimism, the committee kept the line on interest rates, primarily referring to lack of inflationary pressures, which allow the central bank to see how events unfold before further progress is made.
"Members observed that a patient approach to determining future adjustments to the federal tax rate target is likely to remain appropriate for some time, especially in a moderately economic environment and subdued inflationary pressures, although global economic and financial conditions continued to improve. , "said the meeting summary.
For several recent meetings, members had expressed concerns about slowing global growth, the slow Brexit negotiations and the US and China trade barriers.
But the protocol of the last meeting showed a more optimistic tone. "A number of participants observed that some of the risks and uncertainties that had spoken out their prospects earlier this year had moderated, including those related to global economic prospects, Brexit and trade negotiations," the protocol said.
"To say these and other sources of uncertainty remained. In view of global economic and financial developments as well as subdued inflationary pressures, participants generally agreed that a patient approach to determining future adjustments to the federal cate- gic target remained appropriate." ] The meeting ended three days before President Donald Trump intensified the war with China by accusing Beijing of renouncing an agreement. The White House later raised tariffs on China on May 1
Minutes show Fed comfortable where it is
After first indicating that two rate hikes would probably be in 2019, Fed officials earlier this year swung away from a tighter attitude and now forecast no movements in either direction.
However, the markets are priced at least one average before the end of the year. In addition, President Donald Trump has pushed the Fed to lower rates and said a drop as much as a full percentage point would be appropriate.
However, the protocol pointed to a Fed that feels comfortable with both politics and growth.
US and China trade war presses only received brief mention as part of a battery of potentially "significant negative" threats to growth, which was largely diminished by the corresponding upward potential of a strong labor market, optimistic consumer sentiment and remaining stimulus from tax relief in 2017.
"Participants continued to see a sustained expansion of economic activity with strong labor market conditions and inflation near the committee's symmetrical 2 percent targets as the most likely results," said the protocol.
There was even some push for higher rates. The protocol noted "a few" members who said that if the economy continued to progress, the Fed would "have firm" its policy to keep inflation under control. Others, however, were concerned about lower inflation growth, which showed less labor market tightening than 3.6% unemployment may indicate.
Inflation has been a growing problem for policy makers, where the central bank consistently runs its target.
Chairman Jerome Powell said after this month's meeting that he considered the lower price pressure as "transient" and the protocol showed that his fellow officials agreed.
Fed accuses transition factors for low inflation
The note noted that Members attributed the low inflation adjustments to "idiosyncratic factors" such as poor clothing and portfolio management declines, the latter having a delayed fourth quarter stock market leaching effect in 2018. Such transition factors , the note noted, had been a major cause of low inflation in the last few years.
Officials also said they expect the decline in housing costs in the first quarter to be "temporary" as consumer confidence has recently picked up a strong recovery.
Fed holds its benchmark overnight fund price in a target range of 2.25% to 2.5%. The rate was crossed to the upper end of the interval prior to the meeting. This encouraged the committee to lower the interest rate it pays on bank reserves used as a guide for the fund's interest rate to 2.35%. Since then, the fund's rate has slowed down, but still remains near the upper end of the range.
The meeting presented a discussion of why the rate has increased. Fed officials attributed the move to various factors, including increased repo rates and increased demand on the fund market due to banks meeting liquidity coverage conditions.
Members also discussed the composition of the Fed's $ 4 Billion Balance The duration of the bonds it has. The committee has moved on to reduce duration, but members said they have time before making firm commitments.