(Adds details on labor market from minutes, market moves)
WASHINGTON May 21 Federal Reserve policymakers
last month began to lay groundwork for an eventual retreat from
their extraordinarily easy monetary policy with a discussion of
the tools they could employ to accomplish the task, with no
final decisions taken.
Minutes of the session released on Wednesday said Fed staff
presented several approaches to raising short-term interest
rates, but said the discussion was simply "prudent planning" and
not a sign rate hikes would come any time soon.
The debate over when to exit the Fed's highly accommodative
policy and what tools will be most effective is the latest sign
the U.S. central bank is preparing to eventually leave behind
near-zero rates and trillions of dollars of bond purchases.
"Participants generally agreed that starting to consider the
options for normalization at this meeting was prudent, as it
would help the (policy-setting) committee to make decisions
about approaches to policy normalization and to communicate its
plans to the public well before the first steps in normalizing
policy become appropriate," the minutes from the April 29-30
Federal Open Market Committee meeting said.
"The committee's discussion of this topic was undertaken as
part of prudent planning and did not imply that normalization
would necessarily begin sometime soon."
Most investors do not expect the Fed to raise rates until
the middle of next year at the earliest, and the minutes did
little to change those bets.
The 10-year Treasury note was little changed after the
release of the minutes, while U.S. stocks briefly rose to
session highs before slipping lower. The U.S. dollar was
generally unchanged against the yen and the euro.
"The minutes are kind of sparse. They don't say a lot about
the path of monetary policy," said Gus Faucher, a senior
economist at PNC Financial Services in Pittsburgh.
In addition to discussion of the Fed's exit strategy, the
minutes show the length to which participants at the FOMC
meeting talked about labor statistics and what the data is
saying about inflation and wage pressure.
A number of officials argued there was likely more slack in
the labor market than suggested by the nation's 6.3 percent
jobless rate, with sluggish wage gains cited as supporting
Some participants reported labor markets were tight in their
districts, with some sectors reporting a shortage of workers.
A number of participants, according to the minutes, were
skeptical of recent studies suggesting that long-term
unemployment provides less downward pressure on wage and price
inflation than short term unemployment.
The minutes also show that one participant suggested that
labor market underutilization was dropping in line with the
official unemployment rate.
(Reporting by Michael Flaherty and Howard Schneider; Additional
reporting by Ann Saphir in San Francisco and David Gaffen and
Richard Leong in New York; Editing by Tim Ahmann and Paul Simao)