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Fed Minutes Suggest Interest Rate Outlook Could Shift In Either Direction

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While projections provided by the Federal Reserve following the March monetary policy meeting suggested the central bank no longer expects to raise interest rates this year, the minutes of the meeting note the outlook for rates remains fluid.

The minutes said a majority of meeting participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving rates unchanged for the remainder of the year.

Several of these participants saw the current target range for rates of 2.25 to 2.50 percent as close to their estimates of its longer-run neutral level.

However, the minutes noted participants continued to emphasize that future rate decisions would depend on their ongoing assessments of the economic outlook and potential risks.

"Several participants noted that their views of the appropriate target range for the federal funds rate could shift in either direction based on incoming data and other developments," the minutes said.

Some participants even indicated it would be appropriate to raise rates modestly later this year if the economy evolves as they currently expect.

With regard to the economic outlook, the minutes said participants continued to view a sustained economic expansion, strong labor market conditions, and inflation near the Fed's 2 percent target as the most likely outcomes over the next few years.

"Nevertheless, participants generally expected the growth rate of real GDP this year to step down from the pace seen over 2018 to a rate at or modestly above their estimates of longer-run growth," the Fed said.

A number of participants judged that economic growth in the remaining quarters of 2019 and in the subsequent couple of years would likely be a little lower than they had previously forecast.

The downward revisions were attributed to disappointing news on global growth and less of a boost from fiscal policy than had previously been anticipated.

The minutes noted that the meeting also featured continued discussions on options for transitioning to the longer-run size of the balance sheet.

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