Published: Thu, April 12, 2018
Money | By Armando Alvarado

Fed Minutes Show Policymakers Considered Shift in Policy From "Accommodative"

Fed Minutes Show Policymakers Considered Shift in Policy From

Fed officials saw United States trade spats with China as a risk to the economy when they held a policy meeting in March.

Some member say that "monetary policy eventually would likely gradually move from an accommodative stance to being a neutral or restraining factor for economic activity", the minutes said.

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.

It states all participants agreed the outlook for the economy beyond the current quarter had strengthened in recent months. This was the Fed's sixth quarter-point rate hike since December 2015.

However, the meeting minutes showed that already some Fed officials anxious the central bank would have to move faster than previously expected.

In the minutes, Fed policy-makers showed concern about this as well as uncertainty about the implication of Trump's stimulus on fiscal sustainability and real interest rates.

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Finally, the Fed's rate-setters commented on the expected increase in consumer prices over coming months due to negative so-called "base" effects, as the impact of last year's drop in the cost of cellphone plans dropped out of the year-on-year comparison.

"A few" participants also believed the level of survey-based measures of inflation expectations remained too low to be consistent with the Committee's 2% target for inflation.

Fed officials also debated about the risks of an economy operating above trend with a tight labor market.

In itself, that, they said, "would not justify a change in the projected path for the federal funds rate". An overheated economy could not be ruled out, the minutes showed. This likely means Fed officials aren't sure about the impact of the Trump tax cuts on the economy as well as the increase in government spending.

The big issue that's dominated markets news since then has been U.S. trade frictions with China, with both countries announcing tariffs on key products they buy from each other.

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