Fed underlines policy patience as outlook improves

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    WASHINGTON- US Federal Reserve officials, facing a potential bout of inflation this spring in an economy turbocharged by vaccines and government spending, on Tuesday said they will nevertheless keep their easy money plans in place in hopes of speeding displaced Americans back to work.

    A recent rise in US Treasury bond yields seemed to show investors betting the Fed will move sooner than expected to tighten monetary policy as the recovery gains steam and life returns to normal.

    But “we are far from reaching our objectives,” Fed Governor Lael Brainard said, ticking off the litany of ways, from 10 million missing jobs to the pandemic-related drop in women’s labor force participation, in which the US job market is still falling short.

    Inflation is also beneath the Fed’s 2 percent target, and under the central bank’s new approach policymakers want it on track to actually exceed that level “for some time” before taking any action to restrain it.

    “For all of those reasons…we have quite a bit of ground to cover,” before raising the target federal funds rate from its current near zero level, Brainard said in comments to the Council on Foreign Relations. “It is appropriate to be patient…Our statement provides very clear guideposts.”

    At a separate event, San Francisco Fed President Mary Daly struck a similar tone. – Reuters