News Column

Fed Minutes Show Discussion But No Decisions On Exit Plan

May 21, 2014

WASHINGTON (Alliance News) - Discussions about when to raise interest rates do not mean that a hike is imminent, the minutes of the most recent Federal Reserve meeting said Wednesday.

In April, the Fed kept its benchmark rate unchanged at historic low levels near zero and it tapered quantitative easing (QEUR3) by another USD10 billion.

Before voting on that action, policy makers examined "several approaches" for tightening but have not decided on the appropriate mix of tools to wind down its unprecedented support for the US economy.

There was little clarity about when the Fed may hike its benchmark interest rate from near zero.

The Fed remained divided over how much slack remains in the labor market, and some members expressed concerns about downside risks to growth including weakness in the housing sector and the slowing Chinese economy.

Still, policy makers expect the economy to rebound after a lackluster first quarter brought on by brutal weather across much of the US

"The staff's assessment was that the unanticipated weakness in economic activity in the first quarter would be largely transitory and implied little revision to its projection for second-quarter output growth."

Members see little evidence that annual inflation will pick up beyond the Fed's 2% target in the near future.

"With longer-run inflation expectations assumed to remain stable, changes in commodity and import prices expected to be subdued, and slack in labor and product markets anticipated to diminish slowly, inflation was projected to rise gradually toward the Committee's objective," the minutes said.

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Source: Alliance News

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