Fed fairly upbeat about US economy despite new risks: minutes

February 20, 2020 09:19
The US central bank says the current stance on monetary policy is likely to remain appropriate 'for a time'. Photo: Reuters

Federal Reserve officials were cautiously optimistic about their ability to hold interest rates steady this year, even as they acknowledged new risks caused by the China coronavirus outbreak, Reuters reports, citing minutes of the Fed's policy meeting last month.

The minutes released on Wednesday from the Fed's January 28-29 meeting, at which policymakers unanimously voted to keep interest rates unchanged in a target range of between 1.50 percent and 1.75 percent, also showed that officials were skeptical about any big rethink of the central bank’s inflation target, the report noted.

"Participants generally saw the distribution of risks to the outlook for economic activity as somewhat more favorable than at the previous meeting,” the Fed said in the minutes. It went on to say the current stance of monetary policy is likely to remain appropriate “for a time.”

Coming into this year the Fed had made clear that, after three interest rate cuts in 2019, it plans to hold interest rates steady, barring a significant change in the US economic outlook.

Fed Chair Jerome Powell said last week it is too early to tell if the knock-on economic impact of the China coronavirus outbreak on the United States would be severe or sustained enough to cause the Fed to change its current path.

Since the outbreak began investors have brought forward their bets of when the Fed will cut interest rates again, to around June of this year. In the minutes, policymakers said the threat “warranted close watching.”

Despite that, Fed officials offered a fairly upbeat assessment of the economy, expecting consumer spending to “likely remain on a firm footing,” job gains to expand at a healthy pace, continued moderate economic expansion and inflation returning to its 2 percent goal. 

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