Fed minutes show ‘many’ think officials think they can be ‘patient’ on interest rates going forward

Bloomberg News/Landov

Fed Chairman Jerome Powell said last week said the central bank can be patient as it assesses risks to a U.S. economy.

The minutes of the Federal Reserve’ December meeting showed a willingness to delay further interest rate hikes given the volatility in financial markets and concern about global growth, according to minutes of that meeting released Wednesday.

With the backdrop of market turmoil and rising concerns about global growth “many participants expressed the view that, especially in the environment of muted inflation pressures, the FOMC could afford to be patient about further policy firming,” the minutes show.

They argued that weak inflation readings allowed th central bank “some latitude to wait and see” how the data developed in light of the rise in financial market volatility and increased uncertainty over the global economic outlook, the minutes show.

A number of officials said the Fed should be mindful of the downside risks and the effects of past rate hikes before making any further changes to policy. Officials stressed policy was not on a pre-set course.

The minutes suggest a cautious approach to future monetary policy, said Michelle Meyer, head of U.S. economics at Bank of America Merrill Lynch, in an interview on CNBC.

The minutes also dovetail with the remarks from Fed Chairman Jerome Powell late last week, who stressed the Fed would change policy swiftly if economic conditions warrant the change. Powell ‘s remarks calmed markets who viewed the chairman as too upbeat at his press conference after the December rate hike.

Read: Powell signals he’s flexible on interest rates

The minutes also show some talk of slowing down the pace of the shrinking of the balance sheet. At the moment, the Fed is letting $50 billion of maturing securities run off the balance sheet each month.

But other Fed officials were against tapering the pace of the run-off, saying they were worried it would be misinterpreted as a signal about the stance of monetary policy.

A few Fed officials were also against a December interest rate increase, the minutes show, although the voting members of the FOMC decided to push ahead with an interest-rate hike.

“Though financial conditions had tightened and global growth had moderated, [voting] members generally anticipated that growth would remain above trend and the labor market would remain strong,” the minutes said.

The voting members did say that they didn’t see the need for many more interest-rate hikes.

“The FOMC judged that a relatively limited amount of additional tightening would likely be appropriate,” the minutes said.

The Fed has penciled in two rate hikes in 2019, down from three hikes projected in September.

Financial markets currently see no chance of a rate hike in 2019.

While Fed officials remained optimistic about the outlook, contacts in a number of Fed districts “were less upbeat,” the minutes said.

U.S. stocks were stronger on the day, with the Dow industrials

DJIA, +0.39%

  up about 130 points. The yield on the benchmark 10-year Treasury

TMUBMUSD10Y, -0.56%

 slipped slightly.

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