Despite seeing growth had moderated since its last meeting, the Federal Open Market Committee altered its statement so it could start the normalization process when appropriate beginning as early as June, according to the minutes of the March 17-18 meeting, released Wednesday.
"In their discussion of monetary policy for the period ahead, members judged that information received since the FOMC met in January indicated that economic growth had moderated somewhat," the minutes state. "Labor market conditions had improved further, with strong job gains and a lower unemployment rate; a variety of labor market indicators suggested that the underutilization of labor resources continued to diminish."
Going forward, the panel saw moderate expansion and "labor market indicators would continue to move toward levels the Committee judges consistent with its dual mandate." While inflation was expected to stay near its recent lows for the near term, it would gradually increase toward the 2% target in the medium term as the labor market strengthening continues and oil prices rise.
The panel wanted to note in their post-meeting statement "a slowdown in the growth of exports" was a factor in the economic slowdown. "Members also judged that it was appropriate to note that market-based measures of inflation compensation remained near levels registered at the time of the January FOMC meeting."
In removing the word "patient" from the statement, replacing it with language ruling out an April liftoff, and noting rates will rise after the labor market improves further and the FOMC "is reasonably confident that inflation will move back to its 2 percent objective over the medium term."
While "several participants" believed data would "warrant beginning normalization at the June meeting," others said "energy price declines and the dollar's appreciation would continue to weigh on inflation in the near term, suggesting that conditions likely would not be appropriate to begin raising rates until later in the year, and a couple of participants suggested that the economic outlook likely would not call for liftoff until 2016."
The revised statement offered "flexibility to begin raising the target range for the federal funds rate in June or at a subsequent meeting," the statement said. "Members noted that the timing of the first increase would depend on the evolution of economic conditions and the outlook, and that the change in the forward guidance was not intended to indicate that the Committee had decided on the timing of the initial increase in the target range for the federal funds rate."
