WASHINGTON (Reuters) – Federal Reserve officials remain wary about the ongoing risks of the coronavirus pandemic and are committed to bolstering the economy until its recovery is more secure, minutes of the U.S. central bank’s latest policy meeting showed on Wednesday.
With their own forecasts projecting the strongest run of U.S. economic growth in nearly 40 years, “participants agreed that the economy remained far from the (Fed’s) longer-run goals and that the path ahead remained highly uncertain,” the minutes from the March 16-17 meeting said.
“Participants noted that it would likely be some time,” before conditions improved enough for the central bank to consider reducing its current level of support.
Though several policymakers at the meeting indicated they thought interest rates might need to increase sooner than anticipated by the bulk of their colleagues, and perhaps as soon as next year, there was little sense of urgency around that issue in the minutes.
Labor markets were improving, but remained gashed by the pandemic. Inflation would pick up, the minutes noted, but likely subside next year. A recent jump in U.S. Treasury yields was “generally viewed … as reflecting the improved economic outlook.”
Only a couple of the officials cited possible financial stability risks flowing from the Fed’s current policy of maintaining its overnight benchmark lending rate near zero and buying $120 billion in bonds every month – a setting the Fed says is locked in until the economy is well on its way to being healed.
That process is underway, with the economy buoyed by the Fed’s support, massive fiscal spending pushed by the White House and passed by Congress, and an accelerating COVID-19 vaccination program.
But even with a “brighter outlook,” Fed Governor Lael Brainard said on CNBC that the wounds to the economy remain deep, and the Fed’s new approach is to not act until its employment and inflation goals are secured.
Policymakers expect “considerably better outcomes on growth, and employment and inflation” in coming months, Brainard said. “But that is an outlook. We are going to have to actually see that in the data,” and with millions of jobs still missing due to the pandemic “we have some distance to go.”