Fed hinted it might reconsider easy policies if the economy continues to improve rapidly
Federal Reserve officials at their April meeting said a strong upturn in economic activity would warrant discussions on tightening monetary policy, according to the meeting report released on Wednesday.
“A number of participants suggested that if the economy continued to move rapidly towards the Committee’s goals, it might be appropriate at some point in future meetings to start discussing a plan to adjust the pace of purchases of active, ”indicates the meeting summary.
President Jerome Powell said after the meeting that the recovery remained “patchy and far from complete” and that the economy still failed to show the standard of “substantial progress” the committee set before changing policy.
However, since then the Consumer Price Index has shown that inflation is growing at a rate of 4.2% year-on-year, GDP is expected to show growth approaching 10% in the second quarter, and manufacturing and spending indicators show strong upward momentum.
The one exception was an incredibly slow pace of hiring in April, with the non-farm workforce increasing only 266,000 from expectations of a gain of 1 million.
In the April session, the Federal Free Trade Committee responsible for policy development voted to keep short-term benchmark lending rates near zero and continue to buy at least $ 120 billion in bonds each month.
Along with the move, the Fed improved its outlook on the economy, saying growth has “strengthened” and inflation is on the rise.
Since then, Fed officials have united in saying that the economy remains at the mercy of the Covid-19 pandemic and that they are determined to maintain loose policy.
The April meeting took place ahead of the release of inflation figures for the month.
Fed officials took a largely bullish view of inflation at the meeting, predicting that near-term price pressures would ease as the year progresses, according to the session report released on Wednesday.
Participants at the April 27-28 meeting said they expected growing demand with an economic reopening that combines with supply chain issues to push prices above the target for 2% inflation from the Fed.
“After the transient effects of these factors wore off, participants generally expected measured inflation to decline,” the report said.
The minutes indicated that< divers participants >> predicted that “ it would probably be some time before the economy made further substantial progress towards the Committee’s targets of maximum employment and price stability compared to conditions prevailing in December 2020 when the asset purchases. “
The Fed has set itself an ambitious and somewhat ambiguous target for when it will change the ultra-flexible policy it put in place at the start of the pandemic.
Central bankers seek full and inclusive employment and say they will allow inflation to slightly exceed their 2% target in a new political regime that seeks an average around that level, rather than using it as a maximum benchmark before tightening.
This is the latest news. Please come back here for updates.
Become a smarter investor with CNBC Pro.
Get stock picks, analyst calls, exclusive interviews, and access to CNBC TV.
Register to start a free trial today.