Fed minutes express willingness to let looming inflation pass

Fed officials, determined to restore the job market and push inflation to 2% on a persistent basis

 Fed officials, determined to restore the job market and push inflation to 2% on a persistent basis

In the face of a suffering economy and may need time to recover, Federal Reserve officials debated last month how to lay the groundwork for the public to accept higher inflation, according to minutes from the Federal Reserve. monetary policy meeting of the US central bank on January 26-27.

The authorities also discussed the need to “remain vigilant” to signs of tension in the asset markets, the perception of inflation by the population and the incidents of Robinhood-type retail trading platforms.

Fed officials said they remained willing to keep their monetary policy loose to help heal a struggling labor market.

With some prices expected to rebound this spring, “many participants stressed the importance of distinguishing between these one-off changes in relative prices and changes in the underlying trend of inflation,” according to the minutes, released on Wednesday.

In their quest to explain the difference to the public, “participants emphasized the importance of abstracting from temporary factors that affect inflation, such as past low price levels that are out of range” and further price trends. persistent, according to the minutes.

Others were concerned about the possibility of tensions in the financial system.

“A few participants stated that it would be important to remain vigilant to ensure that the banking system remains strong and resilient,” and some mentioned rising asset values ​​”that may have been impacted by retail investors trading through electronic platforms. “.

Still, “participants noted that the economy was far from meeting the (Federal Open Market) Committee’s goal of maximum employment, and that even with a rapid rate of improvement in the labor market, reaching the goal would take some time,” according to the minutes.

The Fed made few changes to its monetary policy statement at its last meeting in January and issued no new economic forecasts.

The US central bank has pledged to keep its key overnight interest rate near zero until inflation is “on track to moderately exceed” its 2% target and the labor market approaches “maximum employment,” a promise that will likely keep rates low for years to come.

In addition, the Fed has promised to continue buying $ 120 billion of government bonds a month until there are “substantial new advances” towards its inflation and employment targets.

Considering that the economy has stalled in recent months, this may mean that Federal Reserve policy will be largely on hold for a long time, and officials, in recent public statements, have stressed that they are not in a hurry to abandon crisis-fighting mode.

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