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Fed members show flexibility on patient policy approach

Jerome Powell, chairman of the Federal Reserve, speaks during a Federal Reserve Board meeting in Washington, D.C., U.S., on Monday, April 8, 2019.

Members of the Federal Open Markets Committee continued their patient monetary policy approach, but several participants indicated that wouldn't limit them from making future rate adjustments as economic factors dictate, according to minutes released Wednesday from its March 19-20 meeting.

At that meeting, the committee held the target range for the federal funds rate at 2.25% to 2.5%.

At a news conference following last month's meeting, Federal Reserve Chairman Jerome Powell said the committee feels its policy rate "is in the range of neutral, the economy is growing at about trend, inflation is close to target, unemployment is under 3%. It's a great time for us to be patient, and watch and wait and see how things evolve."

Some members said the patient approach would need to be reviewed regularly, the minutes showed.

"Several participants noted that their views of the appropriate target range for the federal funds rate could shift in either direction based on incoming data and other developments," the minutes said.

At the March meeting, FOMC members reduced the number of projected rate hikes in 2019 to zero from two. They now project, on average, that the federal funds rate will stay at 2.4% by the end of 2019 and rise to 2.6% by the end of 2020.

Moreover, the committee also reduced its forecast for U.S. gross domestic product in 2019 to 2.1% from 2.3%, and in 2020 to 1.9% from 2%.

The GDP revision reflected the effects of weaker than-expected incoming data on both aggregate domestic spending and foreign economic growth, according to the minutes.

Some participants noted the high level of uncertainty associated with international developments, including ongoing trade talks and Brexit deliberations, although a couple of participants remarked that the risks of adverse outcomes were somewhat lower than in January, the minutes said.

But participants continued to view a sustained expansion of economic activity, strong labor market conditions, and inflation near the 2% objective as the most likely outcomes over the next few years.

"It's a committee that sees economic growth slowing, inflation continued to be relatively muted and lots of risks out there in the external backdrop," said James McCann, senior global economist at Aberdeen Standard Investments. "It's pretty comfortable with its patient mantra, (and) it's pretty happy to leaves rates on hold for a good while yet."

The committee's next meeting is April 30-May 1.