Fed still 'patient' on rates, mulling balance sheet policy: minutes

Fed still 'patient' on rates, mulling balance sheet policy: minutes”

Federal Reserve officials expect some aspects of the economy to improve in the coming months and could still increase interest rates later in the year, minutes from its latest meeting revealed Wednesday.

After concluding a two-day policy meeting on March 20, the Fed chose to maintain the target range for the federal funds rate at 2.25 percent to 2.5 percent. Some officials saw higher rates as appropriate later this year if economic growth continued above its longer-run trend rate, according to the minutes.

Several participants, however, noted that their views of the appropriate target range "could shift in either direction based on incoming data and other developments" and some indicated that if the economy evolved as they now expected, with economic growth above its longer-run trend rate, "they would likely judge it appropriate to raise the target range for the federal funds rate modestly later this year".

Gold prices docked 70 cents to $1,307.60 ounce.

Although a majority of policymakers anticipated they would leave the target range unchanged in 2019, many stressed that their decisions about the appropriate range for interest rates depended on the economic outlook, as well as potential risks to that outlook, according to minutes of the March meeting released on Wednesday. "Minutes suggest Fed officials are comfortable that the USA economy can weather slowing global growth, but patience is paramount", said ANZ FX/rates strategist Sandeep Parekh.

The President recently said he would appoint two political loyalists to the Fed Board - Stephen Moore, a Heritage Foundation fellow, and former pizza executive Herman Cain.

While Trump has suggested that economic growth below 3 per cent is unacceptable, Fed policy makers expect expansion to slow to a more sustainable pace of around 2 per cent this year.

U.S. central bankers also debated possible policy moves the Fed could make after it ended its balance sheet reduction program by September, with some advocating purchases of U.S. Treasury securities at that point.

The minutes said that Fed officials believe "the recent softness likely reflected temporary factors" such as the federal government's 35-day partial shutdown and the sharp drop in the stock market in December.

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