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--Top Takeaways From Minutes Of the April 30-May 1 FOMC Meeting
By Jean Yung and Kevin Kastner
     WASHINGTON (MNI) - The following are the key points from the 
minutes of the April 30-May 1 FOMC meeting released Wednesday:
     --The FOMC's patient stance on interest rates would likely remain 
appropriate "for some time," implying rates would stay on hold for 
longer yet. Inflation pressures remain "muted" while some of the global 
risks and uncertainties that had clouded outlooks at the beginning of 
the year had "moderated." Officials judged that a patient stance was 
warranted "even if" global economic and financial conditions continued 
to improve. The meeting took place ahead of the Trump administration's 
most recent move to raise tariffs on some Chinese imports to 25% from 
     --A few officials flagged the need for higher interest rates if the 
economy evolved as they expected, saying inflation could build quickly 
in an environment of tight resource utilization. However, a few others 
said resource utilization may not be as high as the low unemployment 
rate suggests. 
     --Many officials viewed the recent dip in PCE inflation as "likely 
to be transitory," attributing the softness to idiosyncratic factors. 
Some officials viewed the downside risks to inflation as having 
increased, however. Some were concerned that long-term inflation 
expectations could be anchored below 2%. 
     --GDP growth is expected to slow over the medium term, but many 
officials revised higher their forecasts for the year after 
better-than-expected 1Q GDP. 
     --Officials began preliminary discussions over the design of their 
longer run asset portfolio but saw no need to make a decision "for some 
time." Staff presented the pros and cons of having a portfolio with a 
maturity profile matching that of all outstanding Treasuries, versus one 
with a shorter maturity. The latter would imply a lower fed funds rate 
but allow more capacity for another Operation Twist in the event of a 
downturn that called for use of balance sheet policies. However, some 
officials thought a lower FFR would decrease capacity to provide 
accommodation if needed and the costs of doing Operation Twist could 
outweigh the gains and preferred using forward guidance instead. 
     --The SOMA desk discussed reasons behind recent funding pressures 
in money markets. The staff said a narrower spread between IOER and ON 
RRP would not pose a significant risk of increased take-up at the ON RRP 
facility because repo rates had been trading well above ON RRP for some 
time. However, if another IOER cut was needed in the future, the Fed may 
need to first consider where to set the ON RRP offer rate to mitigate 
that risk. 
     ** MNI Washington Bureau: 202-371-2121 **