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Fed doubts on inflation grow, but rate hike likely soon, minutes show

Wednesday, Nov 22 2017
Fed doubts on inflation grow, but rate hike likely soon, minutes show

The Federal Reserve left the door open a crack for keeping interest rates unchanged until the end of year amid nagging doubts about the persistence of low inflation. Minutes of the Fed’s two-day meeting that ended Nov. 1 show the bank is still on track to raise interest rates soon, but the Fed used somewhat more ambiguous language than it did in September. “Many” Fed policymakers viewed an increase in the benchmark short-term rate as “warranted in the near term,” the minutes said. By contrast Fed officials in September agreed that a rate hike was likely “later this year.”

 

Although most Fed officials still think inflation has been held down by temporary factors that will soon fade, they are less certain than they were just several months ago. Low inflation “might reflect not only transitory factors, but also the influence of developments that could prove more persistent,” the minutes showed. “Many participants observed that there was some likelihood that inflation might remain below 2% for longer than they currently expected.” Some Fed members even took the extraordinary step of suggesting the central bank’s own actions or public statements over the past few years might be partly to blame for fostering a decline in long-term inflation expectations.

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