Meeting Minutes Show Fed Is on Path Toward Flexibility
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.