April 3 (Bloomberg) -- The Federal Reserve is holding off on increasing monetary accommodation unless the U.S. economic expansion falters or prices rise at a rate slower than its 2% target.
“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” 2%, according to minutes of their March 13 meeting released today in Washington.
The central bank last month affirmed its plan, first announced in January, to hold interest rates near zero through late 2014 as the economy may fail to grow fast enough to continue bringing down the unemployment rate. Fed Chairman Ben S. Bernanke has defended the pledge as appropriate since the meeting, saying that despite some improvement in the economy it’s “far too early to declare victory.”
The minutes of the meeting show decreased urgency to add monetary stimulus. At their January meeting, a few members said that current economic conditions “could warrant the initiation of additional securities purchases before long.” In last month’s meeting, no sentiment was expressed for additional easing without a deterioration in conditions.
The FOMC said in March that unemployment is still “elevated” even after recent improvements in the job market. Richmond Fed President Jeffrey Lacker dissented because he doesn’t anticipate that economic conditions will warrant exceptionally low rates for so long.
Fed policy makers also discussed the conditions under which they’d alter their plan to hold rates near zero through at least late 2014. That pledge is conditional on economic conditions “and members concurred that the date given in the statement would be subject to revision in response to significant changes in the economic outlook.”
“A number” of policy makers did not see that threshold being met and said that “while recent employment data had been encouraging” there was a “nonnegligible risk that improvements in employment could diminish as the year progressed.”
Bernanke highlighted those risks in a March 27 television interview with ABC News.
“We need to be cautious and make sure this is sustainable,” he said in the interview. “We haven’t quite yet got to the point where we can be completely confident that we’re on a track to full recovery.”