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The American Rescue Plan passed by President Joe Biden last month was larger than Federal Reserve policymakers had anticipated, according to minutes from the Federal Open Market Committee’s March meeting.

Committee members rolled out a more optimistic outlook for the US economy on March 17 after concluding their two-day policy meeting. The lifted growth estimates incorporated lower COVID-19 case counts, vaccine distribution, and stimulus packages passed by President Donald Trump in December and Biden’s own relief plan. Though some expected Biden’s proposal to be watered down to garner Republican support, the fully intact $1.9 trillion plan’s approval surprised those on Wall Street and, evidently, at the Fed.

“The size of the ARP exacted in March was considerably larger than what the staff had assumed in the January projection,” the meeting minutes showed.

The new stimulus plan and easing of social-distancing measures contributed to expectations for “substantial” gross domestic product growth in 2021. Fed policymakers also anticipate continued vaccination will allow for lockdown measures to be relaxed even further and drive strong growth over the next two years, according to the FOMC minutes.

The Fed elected to hold interest rates near zero and maintain its pace of asset purchases in March. While the central bank’s updated outlook hints at the strongest growth since the 1970s, it’s still “not yet” time to consider tightening monetary conditions, Fed Chair Jerome Powell said in a March 17 press conference.

“The state of the economy in two to three years is highly uncertain and I wouldn’t want to focus too much on the timing of potential rate increase that far into the future,” he added.

The minutes published Wednesday shed more light on the Fed’s plan to maintain its ultra-easy monetary policy stance. Meeting participants noted “it would likely be some time until substantial further …read more

Source:: Business Insider

      

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