The Economy

Fed Cited Sluggish Growth for Patience on Rates

Policymakers still appear to have left themselves "some wiggle room” in determining monetary policy for the rest of 2019.
Matthew HellerApril 11, 2019
Fed Cited Sluggish Growth for Patience on Rates

The majority of U.S. Federal Reserve policymakers believe economic conditions warrant no further interest rate increases this year, according to the minutes of their March meeting.

As Reuters reports, the Fed “pivoted abruptly at that meeting to a much-less aggressive posture,” agreeing to be “patient” about making any moves on rates.

Policymakers expressed concerns over, among other things, sluggish U.S. growth early in the new year, a weaker global economy, the U.K.’s ongoing Brexit struggle, and festering trade tensions between the Trump administration and China.

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“In light of these uncertainties as well as continued evidence of muted inflation pressures, participants generally agreed that a patient approach to determining future adjustments to the target range for the federal funds rate remained appropriate,” the minutes state.

With regard to the outlook for monetary policy, a majority “expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target [federal funds] range unchanged for the remainder of the year.”

Several participants, however, noted that their views of the appropriate target range “could shift in either direction based on incoming data and other developments” and some indicated that if the economy evolved as they currently expected, with economic growth above its longer-run trend rate, “they would likely judge it appropriate to raise the target range for the federal funds rate modestly later this year.”

A strong labor market could help contribute to a rebound in consumer spending and boost economic growth in the months ahead, though not as rapidly as last year, policymakers suggested.

According to MarketWatch, the Fed is “still leaving itself wiggle room” as it determines monetary policy for the rest of the year.

“Policymakers are happy that their about-turn in January helped trigger a clear improvement in financial conditions but some, at least, are concerned about the danger of being boxed-in,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.