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Fed minutes indicate easy-money policy may persist

WASHINGTON — An account of the Federal Reserve's last meeting suggests that policymakers aren't as eager to take away the punch bowl as the market thought.

The minutes of the March 18-19 meeting state that Fed officials worried that their individual projections for when the central bank would start raising interest rates "could be misconstrued" as indicating a shift by the Fed committee to tighter monetary policy.

The average projections released after the March meeting showed a slight move forward in the anticipated timing of a Fed rate increase, and Fed Chairwoman Janet L. Yellen herself gave the impression in a news conference that day that a rate hike could be made by mid-2015, earlier than what the market had been expecting.

But since then, Yellen has sought to reassure investors and others that the Fed remains committed to its easy-money policy, largely because of the weak labor market. The minutes reinforced that view — and investors welcomed it.

Stocks extended a rally Wednesday afternoon after the minutes were released with the usual three-week lag.

If investors were looking for something cheery in the minutes, analysts said, they seemed to seize on this line in particular: "Several [Fed] participants noted that the increase in the median projection overstated the shift in the projections."

Still, it's an open question when the Fed will begin to raise its benchmark short-term interest rate, which has been pinned near zero since December 2008.

The Fed also has been trying to stimulate the economy by buying tens of billions of dollars of bonds every month to try to suppress long-term interest rates, but those purchases are expected to wind down by the end of this year.

Yellen, in a speech in Chicago 10 days ago, argued in very personal terms that extraordinary monetary support was needed because there was a lot of slack in the labor market, with "significantly more people willing and capable of filling a job than there are jobs for them to fill."

But the minutes released Wednesday suggest that some of her colleagues don't share that assessment — and that could test Yellen's leadership in the coming months.

"Participants expressed a range of views regarding the amount of slack," the minutes said.

don.lee@latimes.com

Copyright © 2015, Los Angeles Times
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