Fed: Softer conditions and muted inflation warranted patient approach to further rate increases

"Softer conditions late in the year and muted inflation warranted a patient approach to further rate increases," the Federal Reserve explained on Friday in its semi-annual monetary policy report to Congress.

Key quotes (via Reuters)

• Economy appears to have maintained a 'solid pace' of growth in second half 2018; estimates 'just under' 3 pct growth for year.
• Partial government shutdown likely held down GDP growth in first quarter 2019 'somewhat,' largely due to lost work of federal workers and contractors.
• Timing and size of future adjustments to the fed funds rate will depend on incoming data.
• Consumer spending, business investment appear to have weakened near the end of last year.
• Hourly compensation has 'stepped up' since June 2018 but growth rates remain moderate by historical standards.
• Consumers' perceptions of homebuying conditions deteriorated sharply over 2018 amid higher mortgage rates and still-rising house prices.
• Financial conditions have become less supportive of economic growth.
• Financial system remains 'substantially more resilient' than before financial crisis but notes 'high' debt of businesses and some deterioration of credit standards in second half 2018.
• Potential downside risks to international financial stability include 'political and policy uncertainty' and 'intensification of trade tensions'.
• Longer-run size of Fed balance sheet will be 'considerably larger' than before financial crisis.