Almost all Federal Reserve officials at their last meeting agreed another interest rate increase was “likely to be warranted fairly soon,” but also opened debate on when to pause further hikes and how to relay those plans to the public.
Minutes of the November meeting show policymakers ticking off a series of issues, including a tightening of financial conditions, global risks, “and some signs of slowing in interest-sensitive sectors,” that had begun weighing on their view of the economy.
A few participants who agreed further rate increases were likely to be warranted also “expressed uncertainty about the timing” as Fed officials discussed how to communicate a possible change in their approach to future hikes.
“Participants also commented on how the Committee’s communications in its post-meeting statement might need to be revised at coming meetings, particularly the language referring to the Committee’s expectations for ‘further gradual increases’ in the target range for the federal funds rates,” the minutes said.
“Many participants indicated that it might be appropriate at some upcoming meetings to begin to transition to statement language that placed greater emphasis on the evaluation of incoming data in assessing the economic and policy outlook; such a change would help to convey the Committee’s flexible approach in responding to changing economic circumstances.”
The need for “further gradual rate increases” as appropriate to keep the current recovery on track has been a staple of recent Fed policy statements as the central bank nudged rates back toward more normal levels after a decade near zero. Its removal would flag a possible pause in roughly quarterly hikes that had been expected to continue through 2019, without committing the central bank to moving or not moving at any particular meeting.
The possible policy shift occurred at a meeting at which the Fed also resumed debate on how best to manage short-term interest rates in the future, a decision that could influence the final target size of the Fed’s still-massive balance sheet.
Credit: Source link