Fed minutes: Committee agreed 6.5% threshold was 'outdated,' vote to remove was unanimous
The members of the Federal Open Market Committee agreed unanimously in March that a 6.5 percent unemployment target for raising interest rates was "outdated" and should be removed, according to meeting minutes.
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The March Fed meeting was significant not for what the central bank did regarding its monthly money-printing program, but rather for how it will determine when interest rates will increase.
Previously, the Fed had indicated that a drop in the unemployment rate could trigger the beginning of rate increases, provided it accompanied a 2.5 percent inflation rate. But with the jobless number nearing the target and inflation well short, the Fed decided to change gears.
In the future, the committee will watch "qualitative" measures that look at various metrics within the economy to decide when an increase is warranted.
"With respect to forward guidance about the federal funds rate, all members judged that, as the unemployment rate was likely to fall below 6..5 percent before long, it was appropriate to replace the existing quantitative thresholds at this meeting," the minutes stated.
In remarks to the press after the meeting, Chair Janet Yellen created a bit of a stir when she indicated that rate increases could happen earlier than the market expected—perhaps by late spring. The jolt quickly wore off, though, as markets focused elsewhere.
Markets reacted positively to the release of the minutes, with stocks moving higher as bond yields were mixed.
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