Fed's minutes reflect policymakers' confidence in inflation, economic growth

2018-04-11 19:48:17 GMT (Economies.com)
Fed's minutes reflect policymakers' confidence in inflation, economic growth

The Federal Reserve released the minutes of the March 20-21 meeting, at which the Federal Open Market Committee voted to increase interest rates to a range of 1.50% - 1.75% under new Chair Jerome Powell, while also raising their forecasts for three-year growth, inflation, and interest rates, and cutting unemployment projections. 


FOMC members pointed to the data available to the Committee since the January 30-31 meeting, as the labor market kept improving while economic activity expanded, and the unemployment remained low. 


Members said household spending rose modestly, but consumption growth foundations remained strong, as fixed-rate investment stabilized, while inflation gauges in the last 12 month were near the bank's long-term 2% target, while still below that target when excluding energy and food prices.


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, fell 0.10% to 89.50 from 89.59, with an intraday high at 89.63, and the lowest since March 28 at 89.35. 


Similarly, members said that taking into consideration the labor conditions and current inflation rates, the Committee decided to increase interest rates to between 1.5% and 1.75%, while still 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 and $8 billion respectively in March, and by $18 and $12 billion in April. 


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. 


The following details the Federal Reserve's three year forecasts for growth, unemployment, inflation, and interest rates, released after the March policy meeting. 


Growth rates are expected to range from 2.6% and 3% in 2018, compared to 2.2% to 2.6% in previous forecasts in the December meeting, while in 2019, the bank forecasts a growth of 2.2% to 2.6%, while expecting growth of 1.8% to 2.1% in 2020, compared to 1.7% and 2.0% before, and finally, long-term growth is forecast to range from 1.8% to 2%, compared to 1.8% to 1.9% before.


Unemployment rates for 2018 are expected to range between 3.6% and 3.8%, compared to 3.7% to 4% in previous forecasts in December, while rates for 2019 are forecast to range from 3.4% to 3.7%. For 2020, forecasts point to 3.5% to 3.8%, while ranging from 4.3% to 4.7% in the long term.


Inflation in 2018 is expected to range from 1.8% to 2%, compared to 1.7% to 1.9% in previous forecasts, while ranging from 2% to 2.2% in 2019. In 2020, inflation is projected to range between 2.1% and 2.2%, compared to 2% to 2.1% before,, while settling at 2.0% in the long term, the same as before.


Core inflation in 2018 is forecast to range between 1.8% and 2%, compared to a range from 1.7% to 1.9% in previous projections in December, while ranging from 2% to 2.2% in 2019, and between 2.1% to 2.2% in 2020, compared to a range of 2.0%-2.1% in previous forecasts.  


Finally, the FOMC saw overnight interest rates at 2.1% to 2.4% this year, compared to previous expectations to range between 1.9% and 2.4%, while projecting a range from 2.8% to 3.4% in 2019, compared to 2.4%-3.1% before, as rates are expected to range between 3.1% and 3.6% in 2020, while in the long term, rates are projected to range between 2.8% and 3.0%, same as before. 

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