The members of the Federal Open Market Committee reaffirmed at their most recent meeting that the central bank will keep policy flexible well into the future, according to the minutes released Wednesday.
As the economy continued to shake off the effects of the Covid-19 pandemic, the commission, which sets monetary policy for the Federal Reserve, kept the policy unchanged.
That meant that benchmark interest rates for short-term loans were close to zero and at least $ 120 billion in assets were purchased each month.
In a discussion about the Fed’s buy-back program and interest rate policy, the minutes indicated that there was little chance of change in the short term.
“Participants noted that economic conditions are currently far from the committee’s longer-term goals and that policy stance should remain accommodative until those goals are met,” the meeting summarized. “As a result, all participants supported the maintenance of the Committee’s current settings and results-based guidelines for the federal fund rate and pace of asset purchases.”
On the way to the meeting, investors were looking for a discussion about when the FOMC might slow the pace of bond buying or quantitative easing. The post-meeting statement made no mention of the talks, and Fed Chairman Jerome Powell said afterwards that the Fed would likely keep policies accommodative.
Members noted that the QE program, which brought the Fed’s balance sheet to nearly $ 7.5 trillion, “eased financial conditions significantly and supported the economy substantially.”
The deliberations stem from concerns about the pace of the recovery. Of particular attention is the aim of a ‘broad and inclusive’ recovery of the labor market, across racial, gender and income lines.
The statement after the meeting noted that the speed of economic activity and improvements in the labor market “have slowed down in recent months.” The minutes helped to bolster the Fed’s sentiment in that regard.
“With the economy still a long way from those targets, participants believed it would probably take some time for substantial further progress to be made,” the summary said.
Since the meeting, Fed officials have said almost unanimously that they do not expect significant policy changes until more progress is made towards the central bank’s improved goal for the labor market. Powell and others have emphasized that they will not start raising interest rates to counter inflation, but rather wait for actual price pressure before tightening policies.
“In terms of tapering, it’s just premature. We just set the guidelines. We said we wanted to see substantial further progress toward our goals before adjusting our asset purchase guidelines,” Powell said at his press conference. the meeting.
The minutes noted that asset prices are “high” and the vulnerabilities associated with household and corporate credit levels are “remarkable”. Officials also said some money market funds and open-end mutual funds are facing “significant vulnerabilities related to liquidity transformation.”