Federal Reserve officials wrestled last month with how to apply their new policy framework to an economy battered by the coronavirus pandemic, according to minutes of their Sept. 15-16 meeting released Wednesday.
Officials raised the bar for interest-rate increases at that meeting and signaled they expected it would be at least three years before they would near the new threshold.
Fed officials laid out a three-part test that must be met before they consider lifting short-term rates from near zero. First, they need to be satisfied that labor-market conditions meet their maximum employment goals, which weren’t spelled out. Second, inflation must reach 2%. Third, they will need some evidence—from forecasts or market-based measures—that inflation will continue to run moderately above 2%.
PELOSI CITES POWELL IN LATEST PUSH FOR CORONAVIRUS RELIEF AID
Two members of the rate-setting committee dissented from the decision for opposing reasons. Dallas Fed President Robert Kaplan favored less precise guidance while Minneapolis Fed President Neel Kashkari preferred a bolder version.
New projections released at last month’s meeting show officials expected a somewhat stronger economic rebound this year and a speedier drop in the unemployment rate than they did in June. But there was still considerable uncertainty over the path of the virus and its implications for growth, hiring and loan losses that could weaken the financial sector.
Several Fed officials have expressed concern at the prospect of delayed or reduced fiscal support from Congress and the White House after expanded unemployment benefits and support for small businesses expired this summer. Some officials have said their more optimistic forecast was premised on at least $1 trillion in additional spending.
NEARLY HALF OF AMERICANS WHO LOST JOB TO PANDEMIC CAN’T LAST A