Fed minutes show case for rate hike strengthening

Posted on November 23, 2016

Members of the US Federal Reserve concluded earlier this month that the case for a rate rise continued to strengthen, but that the​y​​ ​should wait for more evidence of inflation and a stronger jobs market before making a further move.

“Members generally agreed that the case for an increase in the policy rate had continued to strengthen,” according to the minutes of the November meeting, reports Demetri Sevastopulo in Washington.

“But a majority of members judged that the committee should, for the time being, await some further evidence of progress towards its objectives of maximum employment and 2 per cent inflation before increasing the target range for the federal funds rate.”

Participants – a broader group than the voting members – generally indicated that their forecasts for the economy “had changed little” since September, the minutes said.

The Fed said a “substantial majority viewed the near-term risks to the economic outlook as roughly balanced”. But it said a few participants were worried about downside risks, which included the risk of weaker-than-expected growth overseas and the “continued uncertainty associated” with Brexit.

The Fed said that the rate-setting committee “expected that economic conditions would evolve in a manner that would warrant only gradual increases in the federal funds rate and that the federal funds rate was likely to remain, for some time, below levels that are expected to prevail in the longer run”.

In opting to hold rates on November 2 – keeping the target range for its benchmark rate at 0.25 per cent to 0.5 per cent – members had signaled the prospect of a rise in short-term rates when they hold their final meeting of the year on December 13-14.

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