Meet­ing Min­utes Show Fed Is on Path To­ward Flex­i­bil­ity

The Bond Buyer - - Market News -

Fed­eral Re­serve of­fi­cials, meet­ing ear­lier this month, saw an­other in­crease in the bench­mark lend­ing rate as likely war­ranted “fairly soon” even while they set the stage for more flex­i­bil­ity in their se­ries of grad­ual hikes.

“Al­most all par­tic­i­pants ex­pressed the view that an­other in­crease in the tar­get range for the fed­eral funds rate was likely to be war­ranted fairly soon,” as­sum­ing the econ­omy per­forms in line or stronger than their ex­pec­ta­tions, the cen­tral bank said in the min­utes of its Nov. 7-8 ses­sion re­leased in Wash­ing­ton Thurs­day.

Of­fi­cials said their post-meet­ing state­ment may need to be mod­i­fied at com­ing meet­ings, “par­tic­u­larly the lan­guage re­fer­ring to the com­mit­tee’s ex­pec­ta­tions for ‘fur­ther grad­ual in­creases,’” the min­utes said.

The min­utes re­in­force com­ments by Chair­man Jerome Pow­ell on Wed­nes­day that sug­gested cen­tral bankers are get­ting close to an es­ti­mated range of in­ter­est rates that nei­ther speed up nor slow down growth and are now adopt­ing a flex­i­ble ap­proach to their pol­icy path.

At the meet­ing this month, U.S. cen­tral bankers left the bench­mark lend­ing rate in a range of 2% to 2.25%. Fed of­fi­cials next meet Dec. 18-19, and fu­tures traders are pric­ing in a more than 70% prob­a­bil­ity of an­other quar­ter-point in­crease in the range for the bench­mark lend­ing rate, which would be the fourth hike of 2018.

A De­cem­ber in­crease would bring the pol­icy rate close to the bot­tom of the 2.5% to 3.5% range pol­icy mak­ers es­ti­mated as neu­tral. At the same time, Fed of­fi­cials are em­pha­siz­ing they are be­com­ing in­creas­ingly re­liant on in­di­ca­tors and data to tell them that they are get­ting close to neu­tral.

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