Fed minutes show confidence improving on growth, price outlook

Federal Reserve officials grew more positive on the economic outlook, citing “substantial underlying economic momentum,” and were increasingly optimistic about achieving their inflation target, according to minutes of last month’s policy meeting.

Fed officials “anticipated that the rate of economic growth in 2018 would exceed their estimates of its sustainable longer-run pace and that labor market conditions would strengthen further,” the minutes of their Jan. 30-31 meeting released in Washington on Wednesday showed. A number of participants “indicated that they had marked up their forecasts for economic growth in the near term relative to those made for the December meeting.”

“A majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate,” the minutes said.
U.S. central bankers estimated economic growth at 2.5 percent for 2018 in December. Private analysts have boosted their outlook to 2.6 percent, according to the median forecast in a Bloomberg News survey. Stocks peaked on Jan. 26 before tumbling at the start of February, and longer-term government bond yields began to climb on the prospects of larger amounts of Treasury issuance.

Also in the January meeting, the Fed left the rate unchanged at a range of 1.25 percent to 1.5 percent, and said inflation was expected to “move up” this year and stabilize around the 2 percent target “over the medium term.”

Participants also discussed numerous uncertainties about the outlook. Several cautioned that “imbalances in financial markets may begin to emerge as the economy continued to operate above potential,” the minutes said. Fed officials also speculated on whether the tax cuts would translate into higher compensation for employees.

Source: Bloomberg Pro Terminal

Jr Trader Alexander Kumanov

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