**MNI POLICY: Fed To Be Patient On Rates 'For Some Time'>

--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 

10%. 

     --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 ** 

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