Fed Held Special Meeting Before Changing Forward Guidance, Minutes Show

(RTTNews) - The Federal Reserve held a special meeting on March 4, according to the minutes of the regularly scheduled meeting held a few weeks later.

At the first meeting, policy makers discussed whether to change its communication on forward guidance, including its unemployment threshold.

Then on March 19, the Fed officially voted to drop its 6.5 percent unemployment target for tightening monetary policy, calling the metric "outdated."

Almost all participants agreed that it was appropriate at this meeting to update the forward guidance, in part because the unemployment rate was seen as likely to fall below the threshold before long. Unemployment was 6.7 percent in March.

Policy makers discussed certain options for replacing the numerical threshold, but ultimately settled on making qualitative descriptions of the factors that would influence the Committee's decision to begin raising the federal funds rate.

At the meeting, members also shaved off a further $10 billion off the Fed's monthly bond purchase.

"Members again judged that, if the economy continued to develop as anticipated, the Committee would likely reduce the pace of asset purchases in further measured steps at future meetings," the minutes read.

Fed Chairwoman Janet Yellen later rattled markets by giving mixed signals on the pace of rate increases.

She told reporters at a post-decision press conference that rate hikes may start about six months after the end of the Fed's bond-buying program, which is expected to wind down completely by October.

In assessing the U.S. recovery, Fed members said economic growth slowed early this year, likely only in part because of the temporary effects of the unusually cold and snowy winter weather

A few participants, however, highlighted factors other than weather contributed to winter lull, including slower growth in net exports following its unusually large positive contribution to growth in the fourth quarter of 2013.

Other members pointed to international developments that bear watching, such as slower growth in China and events in Ukraine.