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Fed’s stance unchanged on economic, labor and inflation trajectories

Federal Reserve Chairwoman Janet Yellen

Members of the Federal Open Market Committee did not change their opinions about the U.S. economy much since their December meeting, showed minutes released Wednesday of the first meeting of 2017.

Following the two-day meeting that ended Feb. 1, “participants generally indicated that their economic forecasts had changed little since the December FOMC meeting. They continued to anticipate that, with gradual adjustments in the stance of monetary policy, economic activity would expand at a moderate pace, labor market conditions would strengthen somewhat further and inflation would rise to 2%,” the minutes said.

FOMC participants, who voted unanimously not to raise rates, also saw near-term risks to the economy as roughly balanced, with “considerable uncertainty” about the prospects for changes in fiscal and other government policy, including the upside risk of more expansionary fiscal policy and downside risks from other government policy changes.

Between the minutes and other communications in recent weeks from FOMC officials including Chairwoman Janet Yellen, “it is clear that another rate hike is a legitimate possibility at the March meeting,” said Bob Miller, managing director, head of BlackRock (BLK)'s U.S. multisector fixed-income team and lead portfolio manager of the BlackRock Total Return Fund. “When considering why the Fed is waiting to raise rates, it's important to understand the uncertainty that potential fiscal policy, which is still largely unknown, introduces to the committee members' thought processes. After all, while it may not be explicitly stated, politics matter.”