WASHINGTON -- Federal Reserve officials at their recent meeting expressed a belief that the central bank could remain "patient" in deciding when to adjust interest rates, though some officials said they thought future rate increases might still be needed.
In minutes released Wednesday from the April 30-May 1 discussions, Fed officials noted that prospects for the U.S. and global economies had improved while inflation had fallen further below the central bank's 2% target.
Financial markets and President Donald Trump are hoping that the Fed will start cutting rates soon to bolster economic growth. The Fed minutes, however, indicated little sentiment for rate cuts.
Instead, the minutes revealed that "a few" participants said they thought more rate increases might be needed to keep low unemployment from triggering unwanted inflation.
"While some investors are betting that the Federal Reserve will be cutting rates by the end of this year, there's not a lot in the minutes ... to support that case," said Mark Hamrick, senior economic analyst for Bankrate.com. "Borrowers and savers should largely expect the status quo for rates at least in the near-term."
At its meeting, the Fed decided to keep its key policy rate unchanged in a range of 2.25% to 2.5%, where it has been since the central bank increased rates for a fourth time last year.
That December rate increase contributed to a nosedive in financial markets as investors began to worry that the central bank was in danger of overdoing its credit tightening and that it risked sending the country into a recession.
Leading the criticism was Trump, who labeled the Fed his "biggest threat" and argued that Chairman Jerome Powell and other Fed officials did not understand financial markets.
In response to a worsening global outlook and other risks to growth, the Fed board members in January did an about-face and began signaling they would be "patient" in changing interest rates. While they had projected two more rate increases this year, they now expect to hold steady.
However, Trump has said the Fed needs to go further to support the economy by cutting rates and restarting a program to buy bonds to put downward pressure on long-term rates. In contrast, the Fed has been trimming its bond holdings, though it has announced those reductions will come to an end later this year.
The minutes did not reveal support for the type of credit easing suggested by Trump. But there was discussion among Fed officials about the fact that inflation this year has moved further below the 2% target.
"In light of recent, softer inflation readings, some [Fed officials] viewed the downside risks to inflation as having increased," the minutes said.
But the minutes said officials still believed that a return to the Fed's 2% target was "the most likely outcome" for inflation.
At a May 1 news conference, Powell said Fed officials believed the recent slowdown in inflation was likely due to transitory issues, with inflation in coming months resuming its climb toward the Fed's target.
The minutes, which were released with the customary three-week delay, cover the discussions among board members and the Fed's 12 regional bank presidents who make up the panel that sets interest rates.
Business on 05/23/2019