–Several Suggest Discussing Alt Econ Scenarios,Response At Future Meet
–Only One Member Said Easy Mon Pol Beyond End-2012 Inappropriate
–‘A Number’ See ‘Substantial Slack’ In The Labor Market

By Brai Odion-Esene

WASHINGTON (MNI) – Most members of the Federal Reserve’s
policymaking Federal Open Market Committee did not change their outlook
for next year and 2014, despite the recent improvement in U.S. economic
data, while “a few” indicated their outlook for growth this year had
rise “somewhat,” the minutes from the March 13 FOMC meeting showed
Wednesday.

With the market on the look out for any indication that additional
easing was discussed, the release showed that a smaller number of the
senior Fed officials at the meeting in Washington saw the need for
additional monetary stimulus should the recovery stutter.

The minutes said participants saw the news between the January and
March meetings as suggesting economic growth over the coming quarters
would be moderate, with the unemployment rate declining gradually
towards a level consistent with the central bank’s dual mandate.

“While a few participants indicated that their expectations for
real GDP growth for 2012 had risen somewhat, most participants did not
interpret the recent economic and financial information as pointing to a
material revision to the outlook for 2013 and 2014,” the minutes said.

In its statement after the March meeting, the FOMC said it was
prepared to adjust the size and composition of its securities holdings
as appropriate to promote a stronger economic recovery in a context of
price stability.

“A couple of members indicated that the initiation of additional
stimulus could become necessary if the economy lost momentum or if
inflation seemed likely to remain below its mandateconsistent rate of 2
percent over the medium run,” the minutes said.

In the minutes from the January meeting, “a few” FOMC participants
saw the possible need for stimulus “before long,” while “other members”
indicated that such policy action could become necessary if the economy
lost momentum.

As for future policy actions by the Fed, the minutes showed that
several participants suggested it could be helpful to discuss at a
future meeting “some alternative economic scenarios and the monetary
policy responses that might be seen as appropriate under each one, in
order to clarify the Committee’s likely behavior in different
contingencies.”

Only one member of the FOMC believed that maintaining the Fed’s
highly accommodative policy beyond the end of this year was
“inappropriate,” the minutes said, with that member arguing that
tightening of monetary policy would be necessary well before the end of
2014 in order to keep inflation close to the Committee’s 2% objective.

“A number of members,” on the other hand, believed that although
recent employment data had been encouraging, there was “a nonnegligible
risk that improvements in employment could diminish as the year
progressed, as had occurred in 2010 and 2011.”

These members, according to the minutes, “saw this risk as
reinforcing the case for leaving the forward guidance unchanged at this
meeting.”

Casting their eye over conditions both in the U.S. and abroad, most
of the FOMC members see a number of factors that are likely to remain
headwinds to economic growth; including slower growth in some foreign
economies, prospective fiscal tightening in the United States, the weak
housing market, further household deleveraging, and high levels of
uncertainty among households and businesses.

The FOMC, however, still expects most of these factors to ease over
time “and so anticipated that the recovery would gradually gain
strength,” the minutes said.

It added that many of the participants noted that strains in global
financial markets had eased “somewhat,” and that financial conditions
were more supportive of economic growth than at the time of the January
meeting.

On the subject of Europe, the minutes said while recent policy
actions in the Eurozone had helped reduce financial stresses and lower
downside risks in the short term; Fed officials noted that “increased
volatility in financial markets remained a possibility if measures to
address the longer-term fiscal and banking issues in the euro area were
not put in place in a timely fashion.”

Tuesday’s release of the FOMC minutes means all eyes now turn to
Friday’s March employment report, and the minutes said “a number” of
FOMC members “judged that the labor market currently featured
substantial slack.”

In addition, “Some participants expressed the view that the recent
increases in payrolls likely reflected, in part, a reversal of the sharp
cuts in employment during the recession, a scenario consistent with the
weak readings on productivity growth of late. In this view, the recent
pace of employment gains might not be sustained if the growth rate of
spending did not pick up,” it said.

The minutes addded that several participants said the “unseasonably
warm weather” of recent months added another element of uncertainty to
the interpretation of incoming data, “and that this factor might account
for a portion of the recent improvement in indicators of employment and
housing.”

On the inflation front, most participants saw little evidence of
cost pressures, the minutes said.

In the short-term, “while the recent readings on consumer price
inflation had been subdued, participants agreed that inflation in the
near term would be pushed up by rising oil and gasoline prices,” the
minutes said, with a few participants suggesting that the recent upward
pressure on oil prices was principally due to geopolitical concerns
rather than global economic growth.

However, with longer-run inflation expectations still well
anchored, the minutes said most participants anticipated that after the
temporary effect of the rise in oil and gasoline prices had run its
course, inflation would be at or below the 2% rate that they judge most
consistent with the Committee’s dual mandate.

** MNI Washington Bureau: 202-371-2121 **

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