Members of the Federal Open Market Committee said economic conditions, rather than the calendar, will likely determine when the Fed will begin to tighten monetary policy, and that the risk of acting too soon outweighs the risk of acting too late, according to minutes of the FOMC’s March 16 meeting released Tuesday.
A number of members noted that the committee’s policy was “explicitly contingent on the evolution of the economy” rather than “the passage of any fixed amount of calendar time.”
A few members noted at the time of the meeting that “the risks of an early start to policy tightening exceeded those associated with a later start,” because the committee has room to be flexible with tightening.
It is constrained from further stimulus by the 0% lower boundary of the federal funds rate.
At the March 16 meeting, the FOMC members kept the rate between zero and 0.25%.
Stable inflation expectations and low levels of resource utilization “were likely to warrant exceptionally low levels of the federal funds rate for an extended period.”
No decisions about the committee’s exit strategy were made at the meeting, the minutes said, as participants agreed to give further consideration to the issue later.
The housing sector and labor market remained concerns, participants said, and pose risks to the economy.
No strains emerged from the Fed’s February closure of five liquidity facilities, according to the minutes.
