Provided the U.S. economy remains near maximum employment, the minutes of the Federal Reserve's latest monetary policy meeting revealed officials want to see further progress on inflation before they consider resuming lowering interest rates.
The minutes of the Fed's January 28-29 meeting also reiterated officials believe a "careful approach" in considering additional adjustments to the stance of monetary policy remains appropriate given the high degree of uncertainty.
Factors mentioned by participants as supporting a "careful approach" included the reduced downside risks to the outlook for the labor market and economic activity and increased upside risks to the outlook for inflation, the Fed said.
While many participants noted the Fed could keep rates at a restrictive level if the economy remained strong and inflation remained elevated, several remarked that policy could be eased if labor market conditions deteriorated, economic activity faltered or inflation returned to 2 percent more quickly than anticipated.
The minutes also said participants observed that the Fed was well positioned to take time to assess the evolving outlook for economic activity, the labor market, and inflation, with the vast majority pointing to a still-restrictive policy stance.
Following the late-January meeting, the Fed announced its widely expected decision to leave interest rates unchanged after cutting interest rates for three straight meetings.
The Fed said it decided to maintain the target range for the federal funds rate at 4.25 to 4.50 percent in support of its dual goals of maximum employment and inflation at the rate of 2 percent over the longer run.
The minutes said participants noted inflation remained somewhat elevated while also observing that recent indicators suggested economic activity had continued to expand at a solid pace, the unemployment rate had stabilized at a low level, and labor market conditions had remained solid in recent months.
The central bank's next monetary policy meeting is scheduled for March 18-19, when Fed officials will also provide their latest projections for rates, inflation and the economy.