Some Fed officials: Hike rates at ‘next meeting’

Most Federal Reserve policymakers expected to raise interest rates “relatively soon,” and some said the Fed should act at its “next meeting ” in December “to preserve credibility,” according to minutes of the Fed’s meeting Nov. 1-2.

The summary of the meeting, which took place less than a week before the presidential election, provides the clearest signal that the Fed plans to lift its benchmark rate for the first time this year at a meeting in mid-December, barring any shocks to the economy.

“Most participants expressed a view that it could well become appropriate to raise the target range for the federal funds rate relatively soon so long as incoming data provided some further evidence of continued progress toward” the Fed’s unemployment and inflation goals.

Some Fed officials argued that “to preserve credibility, such an increase should occur at the next meeting ” — the most blatant indication that the Fed almost certainly will make a move next month.

Policymakers remain divided over the urgency to boost rates in the near-term. Many said risks to the economy could increase if the labor market overheated or voiced concerns that low rates would continue to prod investors to put money in higher-yielding assets. That increases the risk of asset bubbles that could burst and ripple through the financial system and economy.

Some policymakers said allowing the unemployment rate, a near-normal 4.9%, ”to fall below its longer run normal level for a time” could bolster economic growth and help push inflation toward the Fed’s 2% annual goal.

A declining unemployment rate typically spells a tightening labor market in which employers must increase pay more rapidly to attract workers, pushing up inflation.

The Fed has held its key rate steady since raising it last December for the first time in nine years, citing China’s economic slowdown, market turmoil, the United Kingdom’s Brexit vote and a midyear slowdown in U.S. job growth. At the meeting in early November, “a substantial majority” of policymakers “viewed the near-term risks to the economic outlook as roughly balanced,” an upgrade of its views of the economic landscape.

Still, a few policymakers “emphasized that a cautious approach” to raising interest rates “was warranted,” because the Fed funds rate, at 0.4%, was still near zero, so the Fed has little leeway to reduce rates if the 7-year-old economic recovery were derailed.