Fed minutes: Patience to last "for some time" as officials debate balance sheet holdings
By Howard Schneider and Jason Lange
WASHINGTON, May 22 (Reuters) - U.S. Federal Reserve
officials at their last meeting agreed that their current
patient approach to setting monetary policy could remain in
place "for some time," a further sign policymakers see little
need to change rates in either direction.
According to minutes of the Fed's April 30-May 1 meeting,
officials also delved deep into the mechanics of how they could
best structure their holdings of several trillion dollars of
securities to battle a future economic downturn.
They quickly hit a dilemma as they discussed what could be a
several years plan to structure perhaps $3.5 to $4 trillion of
assets to either reflect existing market holdings of U.S.
Treasuries, or to be focused on shorter-term maturities.
"Many participants" said they thought it might help for the
Fed to gradually load up on short-term securities now, so that
they could be traded for longer-term securities and bring down
long-term rates as a way to better stimulate the economy if
needed in the future.
However staff presentations noted that would come at the
potential cost of higher longer-term rates now, "and imply that
the path of the federal funds rate would need to be
correspondingly lower to achieve the same macroeconomic
outcomes." In the scenarios being discussed that would,
ironically, mean the Fed would have less room to cut rates in a
crisis - and be more likely to have to rely on its balance sheet
tools to boost the economy.
No decisions were made.
The Fed's last meeting came before the Trump administration
increased tariffs on Chinese goods and intensified global trade
tensions further with restrictions on Chinese telecom giant
At that point, with U.S. growth continuing, inflation
"muted," and some global risks appearing to have eased, "members
observed that a patient approach...would likely remain
appropriate for some time...even if global economic and
financial conditions continued to improve."
While "a few" participants warned of inflation risks and a
possible need for higher rates, and "several" warned inflation
could weaken, minutes of the policy meeting reflected a
committee poised to bide its time until economic data shift
convincingly in one direction or the other. The committee held
its target interest rate steady at that meeting in a range of
between 2.25 and 2.5 percent
Consistent with Fed chair Jerome Powell's press conference
after the meeting, participants observed "at least part of the
recent softness in inflation could be attributed to
(Reporting by Howard Schneider and Jason Lange, Editing by
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