Fed's minutes pave path for continued policy tightening

The Federal Reserve released the minutes of its May 1-2 meeting, at which the Federal Open Market Committee voted to hold interest rates unchanged at below 1.75% as expected by analysts, and carry on plans to normalize the balance sheet. 

FOMC members pointed to the data available to the Committee since the March 20-21 meeting, as the labor market kept improving while economic activity expanded, and the unemployment remained low. 

Members said household spending slowed down from the recent strong pace of growth, as fixed-rate investment grew solidly, while inflation gauges in the last 12 month rose nearly 2%. 

Members asserted the Committee's commitment to boost job opportunities and stabilize prices, as members still project gradual tightening of the monetary policy to allow the economy to expand moderately.  

As of 06:04 GMT, the dollar index, tracking the greenback against a basket of currencies, rose 0.53% to 94.11 from the opening of 93.61, with an intraday low at 93.51, and the highest since December 12 at 94.19. 

Similarly, members said that taking into consideration the labor conditions and current inflation rates, the Committee decided to hold interest rates between 1.5% and 1.75%, while keeping the monetary policy accommodative, offering further support to the labor sector and nudging inflation firmly towards 2%, and cutting the bank's holdings of treasury bonds and mortgage-backed securities by $12-$18 billion a month.  

The Committee said it's assessing the current and projected economic conditions, with an eye towards achieving its targets of full employment and 2% inflation, while taking into consideration a wide group of data and economic information, including the labor market conditions and inflation indices. 

Members expect the economic conditions to develop in a way that allows for gradual tightening of the policy, with a path that ends just below the projected interest rates levels in the long term, while reaffirming that the actual path of short-term overnight interest rates depends on aforementioned economic projections and data.