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Fed minutes show fiscal stimulus a key for rate forecasts

Published 01/04/2017, 03:48 PM
Updated 01/04/2017, 03:50 PM
© Reuters.  Fed minutes highlight fiscal spending

© Reuters. Fed minutes highlight fiscal spending

Minutes from the Federal Reserve Open Market Committee released on Wednesday from the December meeting showed that potential fiscal expansion occupied the debate on future policy.

About half of Federal Reserve policymakers incorporated an assumption of more expansive fiscal policy under the Trump Administration and nearly all agreed that the upside risks to their growth outlook had increased.

"Members agreed that there was heightened uncertainty about possible changes in fiscal and other economic policies as well as their effects," the minutes of the Dec. 13-14 meeting said.

"About half of the participants incorporated an assumption of more expansionary fiscal policy in their forecasts," though they "agreed that it was too early to know what changes in these policies would be
implemented and how such changes might alter the economic outlook."

The Federal Reserve raised its key policy rate to a target range of 0.50% to 0.75% last month. The quarterly update of its economic projections also showed the median committee member saw three more hikes this year, up from two previously, though the outlook for GDP, inflation and unemployment were little changed.

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