Fed "No Inflation Concerns... Observing Employment and Economic Recovery, No Normalization"

March FOMC Meeting Minutes Released

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Baek Jong-min] It has been confirmed that the U.S. Federal Reserve (Fed) has expressed the view that it will maintain an accommodative monetary policy until strong employment and inflation are confirmed.

In the minutes of the March Federal Open Market Committee (FOMC) meeting released on the 7th (local time), FOMC members mentioned that future interest rate hikes will take some time until there is substantial progress toward maximum employment and price stability goals, and asset purchases will continue at the current pace.

The minutes stated, "The medium-term outlook for economic growth and employment has improved, but the members still consider uncertainty to be high." It added, "The zero-level policy rate and $12 billion monthly asset purchases are helping the economy."

The minutes revealed that FOMC members agreed that changes in Fed policy should be "based primarily on observed outcomes rather than forecasts."

Some members questioned the continuation of the Fed's historic accommodative policy, but this was a minority opinion. The majority emphasized the need for active communication with the market even when changing the pace of asset purchases.

Although 'inflation' was mentioned 64 times in the minutes, most members forecast that inflation will not be a problem in the near term. One member even evaluated that inflation is moving as expected by FOMC members. The Fed projects this year's inflation target at 2.2%.

The Wall Street Journal commented, "The minutes revealed that the Fed has strong expectations for economic recovery."

Lael Brainard, a Fed Governor who is also mentioned as a potential next Fed Chair, detailed the Fed's stance in an interview with CNBC on the same day.

He emphasized, "The U.S. economic outlook is bright, but employment and growth are still far below the Fed's targets." Brainard reiterated the position that "growth must be confirmed in actual data."

Regarding the rise in Treasury yields reflecting inflation concerns, Brainard explained, "It is important to recognize that this is a transitional period," and said that pressure for continued increases in Treasury yields is unlikely.

Earlier, after last month's FOMC meeting, the Fed announced it would keep the policy rate at zero and maintain the pace of asset purchases. The U.S. economic growth rate for this year was revised upward to 6.5%.