The Federal Reserve could keep benchmark interest rates ultra-low for even longer than investors anticipate if the outlook worsens or inflation drops, minutes from the central bank's last meeting suggested.
The minutes of the March 16 meeting released on Tuesday showed lingering concern about the U.S. economy's prospects, with policymakers indicating they were in no hurry to raise rates.
Officials believed their promise to keep rates low for "an extended period" would not unduly constrain the Fed if it felt the need to tighten monetary conditions.
"The duration of the extended period prior to policy firming might last for quite some time and could even increase if the economic outlook worsened appreciably or if trend inflation appeared to be declining further," the minutes said.
"Such forward guidance would not limit the (policysetting) committee's ability to commence monetary policy tightening promptly," they said.
At its March meeting, the Fed held benchmark overnight interest rates steady in a zero to 0.25 percent range and repeated its low-rate vow.
Kansas City Federal Reserve Bank President Thomas Hoenig again dissented, favoring a more flexible commitment to keep rates low "for some time," the minutes said.
Broadly speaking, the Fed's assessment of current economic conditions was downbeat. Members expressed concern about renewed weakness in housing and persistently high unemployment.
They saw a threat to consumer spending from the vicious cycle engendered by a weak labor market.
"Participants agreed that household spending going forward was likely to remain constrained by weak labor market conditions, lower housing wealth, tight credit, and modest income growth," the minutes said.
The Fed characterized inflation pressures as subdued and likely to remain that way, while noting that expectations for price increases are "reasonably" well anchored.
Against that backdrop, a few Fed members indicated they thought the risk of tightening policy too soon was greater than that of waiting too long. Those members felt the pace of monetary tightening could be accelerated if needed, while the Fed had little room to ease policy further.
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