WASHINGTON, Apr 7 (Reuters) – Even as the U.S. economy gained momentum this year, Federal Reserve officials were cautious about the continued risks of the pandemic and pledged to provide monetary support until a rebound is more certain. , reflected the minutes of the central bank’s March meeting.
With their own forecasts estimating the strongest economic growth in nearly 40 years, “participants agreed that the economy stayed away from (the Fed’s) long-term targets and that the way forward remained highly uncertain.” , the minutes indicated.
“Participants said it would probably be some time” before conditions improved enough for the Fed to consider withdrawing the huge stimulus.
However, what that may mean in practice remains unclear, and divisions among Fed officials over how long to maintain central bank support surfaced among Fed officials on Wednesday.
Chicago Fed chief Charles Evans, who agrees with most of his colleagues that interest rates should probably remain near zero until 2023, said he anticipates an uncomfortable period of higher inflation this year, but that the bank The central bank should not give in until it is certain that inflation will not fall below 2% again.
“We really have to be patient and be willing to be bolder than most conservative central bankers would choose to be,” he told reporters.
Separately, Dallas Fed Chairman Robert Kaplan reiterated his longstanding concern that low rates and bond purchases could fuel excesses and imbalances in the markets.
Once the pandemic has receded, he added, the Fed should stop buying bonds and move toward raising rates in 2022, noting that it might even be willing to do both at the same time.
“My thinking is that the reduction (of the purchase of bonds) would come first,” Kaplan said in a virtual discussion hosted by UBS. “I think […] That will be substantially completed before dealing with the federal funds rate, but I would like to keep the flexibility on that. “
At the March meeting, the Fed did not change its near-zero target interest rate or its monthly bond purchase rate of $ 120 billion, nor did it change its permanent commitment to keep everything going until the economy recovers from job losses and other economic damage caused by the pandemic.
But Fed officials did improve their outlook for the economy by a significant margin by incorporating progress on vaccination and the trillions of dollars in recently committed federal spending into their estimates.
The median of the Fed authorities’ projections for economic growth in 2021 increased from 4.2% in December to 6.5%, which if realized would mark the highest growth rate since 1984.
(Reporting by Howard Schneider, Ann Saphir and Jonnelle Marte. Edited in Spanish by Manuel Farías)