Members of the Federal Open Market Committee at its most recent meeting reaffirmed that the central bank will keep the policy untapped until well into the day, according to minutes of the meeting released Wednesday.
With the economy continuing to shake the effects of the Covid-19 pandemic, the committee, which sets the Federal Reserve’s monetary policy, has kept the policy unchanged.
That meant keeping reference short-term lending rates close to zero and keeping the $ 120 billion asset purchase minimum each month.
In a debate over the Fed’s asset purchase program and interest rate policy, the minutes indicated little chance of change soon.
“Participants noted that economic conditions are currently far from the Committee’s long-term goals and that the policy stance should remain accommodative until these goals are met,” the meeting’s summary said. “Accordingly, all participants supported the maintenance of the current setup and the results-based guidance of the Committee on the Federal Fund Rate and the Purchase Rate of Assets.”
Addressing the meeting, investors had been looking for discussions on when the FOMC could start slowing down the pace of bond buying or quantitative easing. The statement after the meeting made no mention of the talks and Fed Chairman Jerome Powell later said the Fed would likely maintain accommodative policy.
Members noted that the QE program, which has brought the Fed’s balance sheet to nearly $ 7.5 trillion, “had materially moderated financial conditions and provided substantial support to the economy.”
The deliberations come amid concerns by central bank officials about the pace of recovery. The goal of a “broad and inclusive” labor market recovery, across racial, gender, and income lines, is a special focus.
The statement after the meeting notes that the speed of economic activity and improvements in the labor market “have moderated in recent months.” The minutes helped amplify the Fed’s sentiment in this regard.
“With the economy still far from these goals, participants judged that it is likely to take some time to achieve substantial progress,” the summary states.
Since the meeting, Fed officials have been virtually unanimous in saying they do not expect significant policy changes until further progress is made toward the central bank’s improved goal for the labor market. Powell and others have stressed that they will not start raising interest rates to avoid inflation, but will wait for real price pressures to appear before the policy hardens.
“As for volume reduction, it’s premature. We just created the guide. We said we wanted to make substantial progress toward our goals before we modified our asset purchase guide,” Powell told the news conference. after the meeting.
The acts noted that asset prices were “high” and the vulnerabilities associated with the levels of indebtedness of households and businesses were said to be “remarkable”. Officials also said some money markets and free capital investment funds face “significant vulnerabilities associated with liquidity transformation.”