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BUSINESS Thursday 20 February 2020
A25

Fed seems inclined to keep rates low as virus poses risks

By CHRISTOPHER RUGABER lowing quarters, Goldman
WASHINGTON (AP) — Fed- Sachs estimates.
eral Reserve officials were At last month's policy meet-
mostly optimistic about the ing, several officials sought
U.S. and global economies to highlight the Fed's deter-
last month, though they mination to raise inflation
noted the risk posed by back to its 2% target level.
China's viral outbreak and These officials "stressed that
said they were ready to the (Fed) should be more
keep their benchmark in- explicit about the need to
terest rate at its current low achieve its inflation goal on
level in the coming months. a sustained basis."
Fed policymakers observed Several officials also sup-
at their Jan. 28-29 meeting ported the idea of allow-
that risks to the U.S. econ- ing inflation to temporarily
omy had faded since their overshoot the 2% target to
previous meeting in De- offset the nearly seven-
cember, according to min- year period in which infla-
utes released Wednesday. tion has been below that
The Trump administration level. Doing so "might un-
had reached a prelimi- derscore the symmetry of
nary trade agreement with that objective," the minutes
China, and Congress ap- In this Feb. 12, 2020, file photo Federal Reserve Chairman Jerome Powell testifies before the Sen- said, meaning that the Fed
proved an updated trade ate Banking Committee on Capitol Hill in Washington. will accept inflation mod-
pact with Canada and Associated Press estly above 2% just as much
Mexico. as it has accepted price
Still, a "number of downside threats from slower growth afterward. The Dow Jones that the virus and Boeing's changes below the target.
risks remained prominent," overseas, policymakers Industrial Average was up decision to suspend pro- As part of an ongoing re-
officials said, including the said, and help lift annual about 150 points in mid-af- duction of its troubled 737 view of its strategy frame-
coronavirus, which "had inflation back to the Fed's ternoon trading. MAX aircraft will cut growth work and tools, the Fed is
emerged as a new risk to 2% objective. Persistently Chairman Jerome Powell by about three-quarters of considering making such
the global growth outlook." low inflation as measured said in testimony before a percentage point in the an approach even more
Many Fed watchers have by the Fed has a been Congress last week that U.S. first three months of this explicit. Powell and other
interpreted that caution as hallmark of the economic growth looked durable and year, as many companies' Fed officials worry that al-
a signal that the Fed's next expansion, now in its 11th that the Fed would "care- supply chains and con- lowing inflation to stay too
move, whenever it occurs, year. fully" monitor economic sumer markets are at least low for too long also drags
is more likely to be a cut, The officials "viewed the damage caused by the partly cut off. down interest rates, giving
rather than hike. Traders current stance of policy as coronavirus. Economists at Much of that growth will the Fed less room to cut
are now betting that the likely to remain appropriate Goldman Sachs estimate likely be made up in fol- rates during a recession.q
odds of a cut by year's end for a time, provided that in-
are at 85%. coming information about
The minutes of the Fed's the economy remained
meeting showed that of- broadly consistent" with
ficials were ready to keep their positive outlook, the
short-term rates at a range minutes showed.
of 1.5% to 1.75% for the Stock prices, which had ris-
foreseeable future. Rates en before the Fed minutes
at that level would help the were released at 2 p.m.
U.S. economy withstand Eastern time, rose higher