The Federal Open Market Committee’s decision to reaffirm the zero to 0.25% target range for the federal funds rate at its March meeting was based on “somewhat” moderated economic growth since January, according to meeting minutes released Wednesday.
Those minutes also showed that market participants surveyed by the Federal Reserve in March “attached the greatest probabilities” to a rate increase in June or September.
Committee members declined to specify a point for considering a rate increase, saying only they would continue to assess the progress toward objectives of maximum employment and 2% inflation. Committee members preferred the flexibility to adjust the target range for the federal funds rate “on a meeting-by-meeting basis,” the minutes said.
In their assessment of recent markets, FOMC staff said asset prices “seemed to reflect receding concerns about downside risks to the global economic outlook,” the minutes said, noting two strong U.S. employment reports and a January consumer price index release above market expectations plus “somewhat more encouraging economic news from Europe.”
With stronger-than-expected labor and inflation data, and perceptions of receding downside risks to the foreign economic outlook, “the expected path for the federal funds rate implied by financial market quotes shifted up over the period,” according to the minutes.
Several FOMC members thought normalization could be warranted at the June meeting, while others worried energy price declines and an appreciating dollar would make it later in the year. Still others thought the economic outlook would not indicate a rate increase, or liftoff,until 2016. the minutes showed.
“Most participants did agree that the committee would be highly accommodative even after liftoff,” Lindsey Piegza, chief economist with financial services firm Sterne Agee in Chicago, said in an interview.
“Remember, we’ve been going through this for five years. I just don’t see any force that’s pushing this sooner rather than later,” said Ms. Piegza, who also picked 2016 for the first rate increase.