Fed officials warn rate hike pace overstated in FOMC minutes

http://www.bloomberg.com/news/2014-04-09/several-fed-officials-said-forecasts-overstated-rate-rise-pace.html The Federal Reserve played down forecasts by some of its own policy makers that interest rates might rise faster than they previously predicted.

“Several participants noted that the increase in the median projection overstated the shift in the projections,” according to minutes of the March 18-19 meeting of the Federal Open Market Committee released today. Some expressed concern the rate forecasts “could be misconstrued as indicating a move by the committee to a less accommodative reaction function.”

U.S. stocks rallied the most in a month while Treasuries pared declines after the minutes eased concern about the timing of future interest-rate increases. Even after rates rise, officials said last month, they might have to be kept at levels considered below normal for longer because of tighter credit, higher savings and slower growth in potential output.

The minutes reinforce Janet Yellen’s message at her debut press conference as chair last month that the interest-rate forecasts of policy makers -- which are displayed as a series of dots on a chart -- are less important than the Fed’s post-meeting statement.

“She was pretty blunt about it, saying ‘Pay attention to the statement, don’t look at the dots,’ ” said Josh Feinman, the New York-based global chief economist for Deutsche Asset & Wealth Management, which oversees $400 billion. “They knew this could be a source of confusion with the dots moving up, and they were thinking about how to manage that.”

The Standard & Poor’s 500 Index rose 1.1 percent to 1,872.18 to close at the high of the day. The yield on the 10-year Treasury note climbed one basis point to 2.69 percent.

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