Fed Minutes: Number of Rising Threats  02/21 06:46

   Federal Reserve policymakers last month noted greater threats to the U.S. 
economy, ranging from adverse effects of the government shutdown to rising 
trade tensions, and decided to emphasize that they would be "patient" in 
raising interest rates.

   WASHINGTON (AP) -- Federal Reserve policymakers last month noted greater 
threats to the U.S. economy, ranging from adverse effects of the government 
shutdown to rising trade tensions, and decided to emphasize that they would be 
"patient" in raising interest rates.

   Minutes of the Fed's January discussions, released Wednesday, showed that 
Fed officials also felt that further rate hikes might only be needed if 
inflation were to accelerate.

   Fed officials also appeared close to agreeing on a plan to stop reducing 
their enormous bond portfolio before year's end --- a step intended to help 
ease upward pressure on borrowing rates.

   The minutes showed that Fed officials believe a "patient approach" to rate 
hikes would give them more time to assess the economic impact of President 
Donald Trump's trade battles with China and other countries, as well as the 
severity of a developing slowdown in global growth.

   In response to the global slowdown, several Fed officials trimmed their 
economic outlooks while acknowledging that downside risks had increased, the 
minutes showed.

   Analysts said the minutes indicated that the bar for restarting rate hikes 
seemed to be quite high.

   "The upshot is we now expect the Fed to leave rates unchanged throughout 
this year," said Paul Ashworth, chief U.S. economist at Capital Economics.

   Ashworth said he believed the Fed's next rate move would be cuts next year 
as U.S. growth slows further.

   The minutes covered the Fed's Jan. 29-30 meeting where the central bank left 
its key policy rate unchanged and signaled a major pivot away from steadily 
raising rates.

   Instead, the Fed's statement said it would be "patient" in determining when 
to hike rates again. The statement cited the global economy, which has been 
slowing, and financial developments including a plunge in stock prices at the 
end of last year, as reasons for the change.

   The minutes said that participants believed "a patient posture would allow 
time for a clearer picture of the international trade policy situation and the 
state of the global economy to emerge and, in particular, could allow 
policymakers to reach a firmer judgment about the extent and persistence of the 
economic slowdown in Europe and China."

   The Fed's decision in January triggered a big rally in stock prices after 
the announcement because it signaled a major change in tone from the December 
meeting when the Fed had raised rates for a fourth time in 2018 and signaled 
that it expected two more rate hikes in 2019.

   Powell said at a news conference following the January meeting that to hike 
rates further, he would need to see rising inflation. The Fed's preferred 
inflation gauge is below the central bank's 2 percent target.

   The minutes said, "Many participants suggested that it was not yet clear 
what adjustments to (the Fed's policy rate) may be appropriate later this this 
year; several of these participants argued that that rate increases might prove 
necessary only if inflation outcomes were higher" than forecast.

   The Fed's string of rate hikes last year prompted heavy criticism from 
President Donald Trump. But since the Fed began signaling a pause in rate 
hikes, the president has held off on further attacks.

   He even invited Powell and Fed Vice Chairman Richard Clarida to a White 
House dinner earlier this month which Treasury Secretary Steven Mnuchin, who 
was also present, described as "quite productive."


(CZ)