‘Tax cut boost may be bigger-than-expected’

WASHINGTON: United States central bankers said the recent tax cuts could juice the economy more than expected in the near term, meaning further interest rate hikes likely will be needed, according to meeting minutes released on Wednesday.

But the minutes also revealed a split on the United States Federal Reserve’s (Fed) policy-setting committee, with some officials saying the central bank could afford to be patient in raising the benchmark lending rate, according to the minutes of the January 30-31 meeting.

The Fed did not increase the key interest rate at last month’s meeting, and indicated three rate hikes were expected this year.

However, that was before the strong January employment report spooked markets due to the fear the Fed will have to raise rates faster to head off inflation.

Many economists now expect four moves this year.

The language in the minutes spooked markets again, as Wall Street, which was in positive territory most of the day, tumbled after the report was released.

Participants in the Federal Open Market Committee meeting pointed to the tax cuts and the improved global outlook as factors supporting US growth this year, and many upgraded their forecasts, even while cautioning that the impact of the tax cuts was not yet clear.