FOMC minutes: Fed saw ‘some time’ before taper conditions met, minutes show

“Participants noted that it would likely be some time until substantial further progress toward the Committee’s maximum-employment and price-stability goals would be realized,” according to minutes from the March 16-17 Federal Open Market Committee meeting published Wednesday.

“A number of participants highlighted the importance of the Committee clearly communicating its assessment of progress toward its longer-run goals well in advance of the time when it could be judged substantial enough to warrant a change in the pace of asset purchases.”

US central bankers left their asset purchase program of $120 billion per month unchanged at the meeting and forecast they would keep the benchmark lending rate near zero until at least 2023. That was despite sharply upgrading their forecasts for growth this year amid rising confidence and a fresh round of fiscal stimulus.

In explanation, Fed Chair Jerome Powell told reporters after the meeting that the economy was “a long way” from maximum employment and sustainable 2% inflation. He also said “it is likely to take some time for substantial further progress to be achieved,” in a reference to the threshold that officials have set for scaling back their asset purchases.

Interest-rate futures have been pricing in the probability of a rate hike in the second half of 2022. Michael Gapen, chief U.S. economist at Barclays in New York, said part of the tension comes from uncertainty in the outlook mapped against uncertainty about how the Fed will respond to actual data.

Non-farm payrolls rose by 916,000 jobs last month as increased vaccinations and easing of state restrictions beefed up the labor market recovery, government data released on Friday showed. But Fed officials have stressed they are looking at a broad dashboard of labor market conditions. Other metrics, such as labor force participation, are still below levels seen in the last expansion.