Fed officials not in a rush to hike in March

The Federal Open Market Committee is preparing to lose its patience, but probably won’t do so in time to raise interest rates next month.

For just about all of last year, US central bankers found reasons not to hike until they finally did in December.

The committee wants to shift out of this ultra-gradual mode, and they seem to have more conviction about a series of increases this year. They pencilled in three moves in quarterly projections released in December, but aren’t convinced that now is the right time to take the next step. That could change at any time if the data confirms their forecast or beats it, minutes of the January 31-February 1 meeting released on Wednesday showed.

The record revealed a tension between participants about foot-dragging at a time when economic reports look solid, versus those who want more clarity and still have some concerns about downside risks. Financial markets are betting this resolves into no action in March, which leads to above 50 per cent odds of a move in May.

“The data we have seen in the first quarter has been pretty impressive,” said Ward McCarthy, chief financial economist at Jefferies LLC in New York. That should meet their hurdle, as stated in the minutes, of data “in line or stronger than their current expectations.” What’s holding them back is their sense that the risk of a big build-up in inflation pressures seems unlikely for now.