The following is an excerpt covering the Federal Open Market Committee's discussion of monetary policy taken from the minutes of the FOMC's March 14-15 meeting, which were released on Wednesday.
For a full text, see here
"In their discussion of monetary policy for the period ahead, members judged that the information received since the Committee’s previous meeting indicated that the labor market had continued to strengthen and that economic activity had continued to expand at a moderate pace. Job gains had remained solid, and the unemployment rate had changed little in recent months.
Household spending had continued to rise moderately, while business fixed investment appeared to have firmed somewhat.
"Inflation had increased in recent quarters, with the 12-month change in the headline PCE price index rising to nearly 2 percent in January, close to the Committee’s longer-run objective. However, nearly all members judged that the Committee had not yet achieved its objective for headline inflation on a sustained basis. Members generally viewed it as important to highlight that
core inflation - which excludes volatile energy and food prices and historically has tended to be a good indicator of future headline inflation -— was little changed and continued to run somewhat below 2 percent. Moreover,
market-based measures of inflation compensation had remained low.
"With respect to the economic outlook and its implications for monetary policy, members continued to expect that, with gradual adjustments in the stance of monetary policy, economic activity would expand at a moderate pace and labor market conditions would strengthen somewhat further. It was noted that recent increases in consumer energy prices could cause inflation to temporarily reach or even rise a bit above 2 percent in the near term. Members anticipated that inflation would stabilize around 2 percent over the medium term and commented that transitory deviations above and below 2 percent were to be expected. Members continued to judge that there was significant uncertainty about the effects of possible changes in fiscal and other government policies but that near-term risks to the economic outlook appeared roughly balanced. A few members noted that domestic upside risks may have increased somewhat in recent months, partly reflecting potential changes in fiscal policy, while some downside risks from abroad appeared to have diminished. Members agreed that they would continue to closely monitor inflation indicators and global economic and financial developments.
"After assessing current conditions and the outlook for economic activity, the labor market, and inflation, all but one member agreed to raise the target range for the federal funds rate to 3/4 to 1 percent. This increase was
viewed as appropriate in light of the further progress that had been made toward the Committee’s objectives of maximum employment and 2 percent inflation. Members generally noted that the increase in the target range
did not reflect changes in their assessments of the economic outlook or the appropriate path of the federal funds rate, adding that the increase was consistent with the gradual pace of removal of accommodation that was
anticipated in December, when the Committee last raised the target range.
"In the view of one member, it was premature to raise the target range for the federal funds rate at this meeting.
That member preferred to await additional information on the amount of slack remaining in the labor market and increased evidence that inflation would stabilize at the Committee’s objective before taking another step to
remove monetary policy accommodation.
"Members agreed that, in determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee would assess realized and expected economic conditions relative to its objectives of
maximum employment and 2 percent inflation. This assessment would take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.
Partly in light of the likelihood that the recent higher readings on headline inflation had mostly reflected the temporary effect of increases in consumer energy prices, members agreed that the Committee would continue to carefully monitor actual and expected inflation developments relative to its inflation goal. A few members expressed the view that the Committee should avoid policy actions or communications that might be interpreted as suggesting that the Committee’s 2 percent inflation objective was actually a ceiling. Several members observed that an explicit recognition in the statement that the Committee’s inflation goal was symmetric could help support inflation expectations at a level consistent with that goal, and it was noted that a symmetric inflation objective implied that the Committee would adjust
the stance of monetary policy in response to inflation that was either persistently above or persistently below 2 percent. Members also reiterated that they expected that economic conditions would evolve in a manner
that would warrant gradual increases in the federal funds rate. They agreed that the federal funds rate was likely to remain, for some time, below levels expected to prevail in the longer run. However, they noted that the actual path of the federal funds rate would depend on the economic outlook as informed by incoming data.
"The Committee decided to maintain its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Members anticipated doing so until normalization of the level of the federal funds rate was well under way. They noted that this policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions."