Federal Reserve sees 'some time' before substantial progress is made on goals

• Federal Reserve officials expect that it "would likely be some time until substantial further progress toward the Committee’s maximum-employment and price-stability goals would be realized, according to the minutes of the Federal Open Market Committee's March 16-17 meeting.
• As a result, asset purchases will continue at least at the current pace until such progress is made, they said. To recap, the FOMC kept the federal funds rate target range at 0.0%-0.25% at its last meeting and said it would continue to increase its holdings of Treasury securities by at least $80B per month and of agency mortgage‑backed securities by at least $40B per month.
• They do see consumer spending rebounding as vaccinations become more widespread, social distancing measures are relaxed, the the public becomes more comfortable with closer personal interactions
• That accounted for their overall improved economic outlook vs. their previous economic projections.
• "Many participants also pointed to the elevated level of household savings and judged that the release of pentup demand could boost consumption growth further as social distancing waned," according to the minutes.
• The committee's current guidance for the federal funds rate and asset purchases are "serving the economy well," they said. The benefit of such outcome-based guidance is that it won't need to be recalibrated often in response to an evolving outlook. 
• In line with the Fed's inflation averaging framework, they discussed how "changes in the path of policy should be based primarily on observed outcomes rather than forecasts."
• While the economic outlook improved between the Fed's Summary of Economic Projections, some FOMC members noted that labor force participation continues to be weighed down by workers' health concerns and additional childcare responsibilities due to virtual schooling. Therefore, the recovery of the labor market will depend on how rapidly those affected by those issues can rejoin the labor force.
• As for inflation, most expect an increase in inflation this year as compared with weak readings a year ago and due to supply constraints in some industries. But after after that shakes out, they expect "that annual inflation readings would edge down next year."
• They saw the notable recent rise in longer-term Treasury yields wasn't a cause for concern as they believe it reflects an improved economic outlook, some firming in inflation expectations, and expectations for increased Treasury debt issuance. Most FOMC members viewed the risks to the outlook for inflation as "broadly balanced."
• "Disorderly conditions in Treasury markets or a persistent rise in yields that could jeopardize progress toward the Committee’s goals were seen as cause for concern," the minutes said.
• Even with "positive indicators and an improved public health situation, participants agreed that the economy remained far from the committee’s longer-run goals and that the path ahead remained highly uncertain, with the pandemic continuing to pose considerable risks to the outlook."
• The pandemic "continued to weigh on economic activity, employment, and inflation was posing considerable risks to the economic outlook."