Fed officials still expect 2015 rate hike, minutes show
Most Federal Reserve policymakers last month continued to expect to raise interest rates in 2015 despite their decision to hold off at their September meeting, downplaying the effects of recent global economic turmoil and stock market volatility on the U.S. economy.
Still, minutes from the Fed’s eagerly anticipated Sept. 16-17 meeting reveal the central bank held off on boosting its benchmark rate because the recent developments posed some risk to the recovery and failed to bolster their confidence that inflation would return to the Fed’s annual 2% target over the medium term.
“Most participants continued to anticipate that ... the conditions for (raising rates) had been met or likely would be met by the end of the year,” according to the minutes, released Thursday.
Yet while officials were largely satisfied that the labor market had met the Fed’s goals — unemployment is a near-normal 5.1% — they were concerned about the new risks to the economy and hadn’t gained confidence that anemic inflation would soon accelerate.
“They agreed that developments over the inter-meeting period had not materially altered (their) economic outlook,” the minutes said.
“Nevertheless, in part because of the risks to the outlook for economic activity and inflation, the committee decided that it was prudent to wait for additional information confirming that the economic outlook had not deteriorated and bolstering members’ confidence” that inflation would pick up.
Michael Gapen, chief U.S. economist of Barclays Capital, says the meeting summary undercuts claims by some policymakers that the decision to stand pat lastmonth was a close call.
Last month, 13 of 17 Fed policymakers still projected the central bank would raise the benchmark rate this year, but they forecast a more gradual rise over the next few years. Some economists, however, now believe the Fed and its chief, Janet Yellen, will wait until early 2016.
That’s partly because the labor market has shown signs of wobbling since the September meeting, with the government estimating that employers added just 136,000 jobs in August and 142,000 in September, well below the 200,000-plus monthly average since 2014.
Fed policymakers had been concerned that “slack” in the labor market — such as part-time workers who prefer full-time jobs — remained elevated. But last month, most Fed officials said that such slack “had been substantially reduced.”