Members of the Federal Open Market Committee confirmed at their latest meeting that the central bank will keep the policy loose in the future, according to the minutes from the meeting published on Wednesday.
As the economy continues to shake up the aftermath of the Covid-19 pandemic, the committee, which sets monetary policy for the Federal Reserve, kept the policy unchanged.
This meant keeping reference short-term borrowing rates close to zero and maintaining a minimum of $ 120 billion in asset purchases each month.
In a discussion of the Fed’s asset purchase program and interest rate policy, the minutes indicated little chance of change in the near future.
“Participants noted that economic conditions are currently far from the Committee’s long-term goals and that the policy stance will need to remain flexible until those goals are achieved,” the meeting summary said. “Accordingly, all participants supported the maintenance of the Committee’s current settings and outcome-based guidelines for the rate of federal funds and the pace of asset purchases.”
Entering the meeting, investors sought a discussion on when the FOMC could start slowing down the pace of bond purchases or a quantitative easing. The statement after the meeting did not mention the talks and the Fed chairman Jerome Powell he then said the Fed was likely to keep policies flexible.
Members noted that the QE program, which reached nearly $ 7.5 trillion on the Fed’s balance sheet, “materially eased financial conditions and provided significant support to the economy.”
The debate comes amid concerns from central bank officials about the speed of recovery. A special focus is the goal of a “broad and inclusive” recovery of the labor market, across racial, gender and income lines.
A statement after the meeting noted that the pace of economic activity and improvements in the labor market have been “moderate in recent months”. The minutes helped boost Fed sentiment in that regard.
“Given that the economy is still far from these goals, participants estimated that it would probably take some time to make significant further progress,” the summary states.
Since the meeting, Fed officials have been almost unanimous in their statements do not expect significant policy changes until greater progress is made towards an improved central bank target for the labor market. Powell and others have stressed that they will not start raising interest rates to ward off inflation, but will wait for real price pressures to emerge before policy tightening.
“As for the narrowing, it’s too early. We’ve just created guidelines. We said we want to see significant further progress toward our goals before we change our guidelines for buying property,” Powell told a news conference after the meeting.
The minutes noted that property prices were “elevated” and said vulnerabilities related to household and corporate borrowing levels were “noticeable”. Officials also said some money markets and open-end mutual funds face “significant vulnerabilities related to liquidity transformation”.