Investing.com - Minutes from the March Federal Reserve Open Market Committee meeting on Wednesday showed the outlook had changed little since January with further strengthening of the labor market and progress towards the inflation target and that rate hikes are likely in line with a forecast for three this year.
But members were split over whether stronger inflation warranted faster hikes now or a more gradual pace given the persistence of low inflation in the past.
"Provided that the economy continued to perform about as expected, most participants anticipated that gradual increases in the federal funds rate would continue and judged that a change to the Committee's reinvestment policy would likely be appropriate later this year," the summary, or minutes, said.
There was also uncertainty over how the Trump administration would impact policy and when and how to unwind the Fed balance sheet. Most members judged that changes to the reinvestment policy would likely be appropriate later this year which would allow the balance sheet to shrink. Several options were considered including whether to phase out reinvestments or to stop them all together. Nearly all participants said the policy shift should be communicated to the markets.
The Fed currently holds $4.5 trillion in bonds and actions to trim the balance sheet could have a major impact on markets given its magnitude. Fed Chair Janet Yellen indicated that such a move would be akin to a rate hike.