Federal Reserve policymakers agreed that current stance on monetary policy was likely to remain appropriate "for a time" to sustain economic growth and support the pace of inflation, which continues to fall short of the central bank's target.
Minutes of the Fed’s Jan. 28-29 policy meeting, released on Wednesday, showed there was a firm consensus among members to keep rates on hold until there was a significant change to the U.S. economic outlook.
Fed policymakers said they expected economic growth to continue at a moderate pace in the wake of easing trade uncertainties and signs of stabilization in global growth, according to the minutes. The outbreak of the coronavirus was flagged as a new risk to global growth outlook, which Fed members said warranted close watching at present, suggesting that the current pace of policy remains appropriate.
"With regard to monetary policy beyond this meeting, participants viewed the current stance of policy as likely to remain appropriate for a time ... to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 percent objective," the minutes showed. "(T)here were some signs of stabilization in global growth, though uncertainties about the outlook remained, including those posed by the outbreak of the coronavirus."
In recent weeks, worries about Covid-19's impact on global growth had sparked some hope the Fed could deliver a rate cut sooner rather than later.
But Chairman Jay Powell, earlier this month, quashed those hopes somewhat, saying it was "too early" to determine the economic impact from the virus.
"We know that there will be some — very likely be some — effects on the United States (from the coronavirus fallout)," Powell said. "I think it’s just too early to say. We have to resist the temptation to speculate on this."
Still, investors continue to bet on a quarter-point rate cut in second half of the year, which is at odds with the Fed's dot plot released in December, showing that policymakers expect rates to remain on hold this year.
In recent weeks, policymakers have continued to back the central bank's wait-and-see approach.
"It is my view that, based on my base-case outlook for the U.S. economy, the current setting of the federal funds rate at 1.5 to 1.75 percent is roughly appropriate," Dallas Fed President Robert Kaplan wrote in an essay released Tuesday morning.
Data since the last meeting appears to support the Fed’s case to keep rates steady.
January's employment report showed the economy generated a better-than-expected 225,000 new jobs last month, while the pace of inflation at 1.6%, continued to lag the Fed’s 2% target.
The introduction of an inflation range - as a tool to achieve the 2% target - has been floated at the Fed, but so far policy members appear reluctant to adopt the measure, citing potential communications challenges.
At the meeting, Fed members discussed the use of an inflation range, but most participants expressed concern that "introducing a symmetric inflation range around the 2% objective following an extended period of inflation mostly running somewhat below 2% could be misperceived as a signal that the Committee was comfortable with continued misses below its symmetric inflation objective," the minutes showed.