Biden's stimulus plan went beyond what the Fed expected

• President Biden's stimulus plan was "considerably larger" than the Fed expected, FOMC minutes showed.
• Members also emphasized it will "likely be some time" before the Fed considers policy changes.
• The $1.9 trillion measure, along with vaccination and reopening, boosted the Fed's growth outlook.

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 progress" toward the Fed's maximum-employment and above-2% inflation targets would be met, according to the minutes. Powell has repeatedly cited "substantial further progress" as the threshold for when officials might consider shrinking its asset purchases.

Those fearing an unexpected pullback in Fed support can find solace in the FOMC minutes. Several meeting participants emphasized the importance of giving markets clear communication of how the central bank is assessing progress toward its goals, the minutes showed. The Fed will indicate "well in advance" when it is considering a change in its asset purchase plan, the minutes added.

The meeting notes underscore how the Fed is sticking to its message, Brad McMillan, chief investment officer at Commonwealth Financial Network, said.

"The big message from the Fed minutes is that the central bank is as unconcerned in private about inflation as it is in public," he said in an emailed statement. "There appears to be no hidden interest in higher rates, suggesting that rates will indeed remain low until unemployment drops down to pre-pandemic levels."