Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Facing a still-scarred economy that may need an extended time to recover fully, Federal Reserve officials last month debated how to lay the groundwork for the public to accept higher inflation, and also the need to “stay vigilant” for signs of stress in buoyant asset markets, according to minutes of the U.S. central bank’s Jan. 26-27 policy meeting.

In discussions that ranged from the public’s perceptions of inflation to the vagaries of Robinhood-type retail stock trading platforms, Fed officials said they were still prepared to keep their easy monetary policy on track to help heal a job market still ailing from the impact of the coronavirus pandemic.

With a jump in some prices expected this spring, “many participants stressed the importance of distinguishing between such one-time changes in relative prices and changes in the underlying trend for inflation,” according to the minutes, which were released on Wednesday.

Story continues below advertisement

“A number of participants” said they saw such price increases on the horizon for goods “whose production has been subject to supply chain constraints, or soon could be; others anticipated that a possibly abrupt return to normal levels of activity could result in one-time increases in certain prices,” the minutes stated as Fed officials wrestled with how to prepare for a post-pandemic reopening of the economy.

The United States remains under siege from the health crisis, but with new vaccines being distributed and inoculations running at more than 1.5 million each day, the economy is expected to run hotter this year.

Major food producers said this week that they were mulling possible price hikes, and data on Wednesday showed the producer price index for final demand jumped last month by the most in more than a decade.

Fed officials, determined to restore the job market and push inflation to 2 per cent on a persistent basis, plan to ignore all that.

In the drive to explain why to a public typically sensitive to the prices of basic goods like food and energy, Fed officials emphasized the need to focus on the differences between “temporary factors affecting inflation” and more systemic changes in prices that the central bank tries to target, the minutes showed.

In a debate over the pandemic’s endgame, others were concerned about the potential for stress to bubble up in the financial system.

“A few participants stated that it would be important to stay vigilant to ensure that the banking system remained strong and resilient,” with “some participants” noting the boom in initial public offerings of stock, and rising asset values “that might have been affected by retail investors trading through electronic platforms.”

Story continues below advertisement


Though it was not mentioned by name in the Fed minutes, the dramatic rise and crash of video game retailer GameStop and other so-called “meme” stocks was on the minds of policymakers. It is the topic of a congressional hearing this week, and also raised concerns the Fed’s loose money policy, used to nurse the economy through the pandemic, may fuel a damaging asset bubble.

Similarly, the massive federal stimulus provided to the economy last year and expected to soar even further in the coming months has been critical to keeping families afloat, but also represents “upside risks” if consumers spend more freely than expected in a reopened economy, the minutes noted.

After a grim winter that saw coronavirus infections surge but also witnessed the rollout of new vaccines, some analysts argued the Fed may find itself playing catch-up if things improve faster than anticipated.

“In just one more month another 50 million people will likely receive the initial shot,” of the two-dose COVID-19 vaccines currently approved, said Bob Miller, head of BlackRock’s Americas Fundamental Fixed Income. “Further, we’re about to get another round of fiscal policy stimulus ... This confluence of factors could force the Fed’s hand.”

For now, however, the premium is on keeping support for the economy in place.

Story continues below advertisement

“Participants observed that the economy was far from achieving the Committee’s broad-based and inclusive goal of maximum employment and that even with a brisk pace of improvement in the labor market, achieving this goal would take some time,” the minutes said.

The Fed made few changes to its policy statement at its meeting in January. It is scheduled to release its next policy statement and new economic projections on March 17.

The U.S. central bank has pledged to keep its key overnight interest rate near zero until inflation is “on track to moderately exceed” its 2 per cent target and the job market is approaching “maximum employment” - a promise likely to keep rates low for years to come.

In addition, the Fed has promised to continue purchasing $120 billion of government bonds per month until there has been “substantial further progress” towards its inflation and employment goals.

Given the economy’s halting progress in recent months, that may mean Fed policy stays largely on hold for an extended period, and officials in recent public statements have emphasized they are in no rush to shift away from crisis-fighting mode.

“We’re going to be patient,” Fed Chair Jerome Powell said at a news conference after the end of last month’s policy meeting. “We’ll seek inflation moderately above 2 per cent for some time ... The way to achieve credibility on that is to actually do it. And so that’s what we’re planning on doing.”

Story continues below advertisement

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies