18 Feb 2015
FOMC Minutes: Rates might stay low for a longer time
FXStreet (Córdoba) - FOMC latest minutes showed members remain reluctant to raise rates even when economic conditions have improved. According to the minutes, FOMC officials discussed the tradeoffs of the risks associated with the timing of the beginning of policy normalization and “many” were inclined to keep the federal funds rate at its effective lower bound “for a longer time”.
Associated with the risks of an early tightening, many officials observed that a premature increase in rates “might damp the apparent solid recovery in real activity and labor market conditions”. Among downside risks, officials noted weak inflation, a stronger dollar, and heightened overseas risk. One member even recommended that the Fed should consider ways to provide more, not less, accommodation.
Minutes showed Fed officials continue to assess incoming information and the path of future rates will be data dependant. However, the Committee noted the difficult to specify in advance a list of economic indicators and their appropriate values in order to start the normalization process. Nevertheless, further improvement in labor market conditions and continued growth in real activity would be necessary conditions.
FOMC members agreed that if it is communicated in an effective manner to markets and general public the idea that federal funds rates path will continue to rely on economic data, the precise date at which the first hike takes place would have “ a less important bearing on economic outcomes”.
Communication strategy was discussed by Fed officials that considered that removing the “patient” language on the statement could risk a shift in market expectations “toward an unduly narrow range of dates”.
Next FOMC meeting will be held March 17-18, 2015 and it will be followed by a Janet Yellen’s speech.
Associated with the risks of an early tightening, many officials observed that a premature increase in rates “might damp the apparent solid recovery in real activity and labor market conditions”. Among downside risks, officials noted weak inflation, a stronger dollar, and heightened overseas risk. One member even recommended that the Fed should consider ways to provide more, not less, accommodation.
Minutes showed Fed officials continue to assess incoming information and the path of future rates will be data dependant. However, the Committee noted the difficult to specify in advance a list of economic indicators and their appropriate values in order to start the normalization process. Nevertheless, further improvement in labor market conditions and continued growth in real activity would be necessary conditions.
FOMC members agreed that if it is communicated in an effective manner to markets and general public the idea that federal funds rates path will continue to rely on economic data, the precise date at which the first hike takes place would have “ a less important bearing on economic outcomes”.
Communication strategy was discussed by Fed officials that considered that removing the “patient” language on the statement could risk a shift in market expectations “toward an unduly narrow range of dates”.
Next FOMC meeting will be held March 17-18, 2015 and it will be followed by a Janet Yellen’s speech.