US still far from Fed targets, with needed support ‘for some time’: minutes By Reuters

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© Reuters. FILE PHOTO: The Federal Reserve Board building on Constitution Avenue is shown in Washington

WASHINGTON (Reuters) – Even as the U.S. economy picked up steam this year, Federal Reserve officials remained cautious about the continued risks of the pandemic and pledged to support monetary policy until a rebound was more certain. , reflect the minutes of the central bank’s March meeting. With their own forecasts projecting the strongest economic growth streak in nearly 40 years, “participants agreed that the economy stayed away from (the Fed’s) long-term targets and that the way forward remains. very uncertain, “Fed minutes said Wednesday. “Participants said it would probably be some time” before conditions improved enough for the Fed to consider withdrawing support. However, what that may mean in practice remains unclear, and divisions among Fed officials over how long to maintain massive central bank support manifested on Wednesday. Chicago Fed Chairman Charles Evans, who agrees with most of his colleagues that interest rates will likely need to say close to zero until 2023, said he anticipates an uncomfortable period of higher inflation this year, but that the Fed shouldn’t budge until it‘s sure. that prices will never fall below the Fed’s 2% inflation target again. “We really have to be patient and be willing to be bolder than most conservative central bankers would choose to be,” he told journalists. Meanwhile, Dallas Fed Chairman Robert Kaplan reiterated his long-standing concern that low rates and Fed bond purchases could fuel excesses and imbalances in the markets. Once the pandemic has receded, he said, the Fed should cut bond purchases and move toward raising rates in 2022, noting that it might even be willing to do both at once. “My thinking is that downsizing would come first,” Kaplan said in a virtual discussion hosted by UBS. “I think that, in my opinion, it will be substantially completed before the Fed funds rate is dealt with, but I would like to remain flexible on that.” NO CHANGES FROM THE MARCH MEETING At the March 16-17 meeting, the Fed made no changes to its near-zero target interest rate or monthly bond purchase rate of $ 120 billion, and it did not change its An ongoing commitment to keep all of that in place until the economy recovers from lost jobs and other financial damage caused by the pandemic and associated acute recession. But Fed officials did improve their outlook for the economy by a significant margin by probing progress on vaccines and the trillions of dollars in recently pledged federal spending and concluding that the economy was ready. The median projection of the Fed’s policymakers for economic growth in 2021 increased from 4.2% in December to 6.5%, which if achieved would be the fastest rate of expansion since 1984. Even with its policies without changes, the outcome of the meeting suggested an evolving debate. among policymakers on how quickly the recovery can occur, with four officials, including Kaplan of the Dallas Fed, projecting a rate hike for next year. That’s much faster than the core of officials who don’t expect rates to go up until at least 2024. A change in the Fed’s strategy last year caused the Fed to put a higher premium on boosting jobs, and he said that he wanted inflation to rise to its formal 2% target “for some time” in order to make up for years when the pace of price increases was too weak. This new framework was unanimously adopted. But the change of mind from several policymakers raised some questions about whether the commitment is as deep as it stands.