Fed minutes on future key policy rate trend

Fed minutes on future key policy rate trend

The Federal Reserve discussed the need to slow down the economy, according to minutes of the March FOMC meeting released Wednesday.

"Participants did not see the steel and aluminium tariffs, by themselves, as likely to have a significant effect on the national economic outlook, but a strong majority of participants viewed the prospect of retaliatory trade actions by other countries, as well as other issues and uncertainties associated with trade policies, as downside risks for the U.S. economy", the minutes said.

The Fed's target range for its benchmark lending rate is now between 1.50 and 1.75 percent.

It was also the first meeting led by Fed Chairman Jerome Powell, who took the helm of the central bank in February.

The Fed is expected to keep rates unchanged at its next policy meeting on May 1-2, but investors overwhelmingly see another rate increase at the following one in mid June. "In addition, all participants expected inflation on a 12-month basis to move up in coming months". This was the Fed's sixth quarter-point rate hike since December 2015. The Fed's most recent projection calls for only three rate hikes.

On the subject of the recent bout of volatility in global financial markets, "a few" policymakers were concerned that a lengthy period with the economy operating above its potential rate of growth might, over time, pose financial stability risks.

In itself, that, they said, "would not justify a change in the projected path for the federal funds rate".

Some officials argued that a modest overshoot of the Fed's 2% target might help anchor inflation expectations.

Also worth noting, "a number" of the Fed's highest-ranking officials also thought that uncertainty about whether the recently approved tax cuts would become permanent or about the implications of running wider government spending deficits represented sources of downside risk to growth.

They include possible retaliation by other countries in response to President Donald Trump's trade policies.

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