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Fed policymakers see future rate rises guided by inflation, fiscal stimulus

Wednesday, Jan 03 2018
Fed policymakers see future rate rises guided by inflation, fiscal stimulus

U.S. Federal Reserve policymakers showed worry over the fate of currently low inflation and saw recent tax changes as providing a boost to consumer spending, according to the minutes of the U.S. central bank's last policy meeting on Dec. 12-13 released on Wednesday. The details of the meeting, at which the Fed raised interest rates for the fifth time since the 2008 financial crisis, also showed that officials have a similar lack of certainty over the impact of fiscal stimulus on raising price pressures. "Most participants reiterated their support for continuing a gradual approach to raising the target range, noting that this approach helped to balance risks to the outlook for economic activity and inflation," the Fed said in the minutes.

At its December meeting, the Fed kept its forecast for three rate rises this year and in 2019 unchanged even as policymakers anticipated a short-term boost in U.S. economic growth from the Trump administration's sweeping $1.5 trillion tax overhaul signed into law on Dec. 22. In December, the Fed forecast ultra-low unemployment of below 4 percent in 2018 and 2019, but still predicted inflation would remain below 2 percent at the end of 2018. The latest minutes showed that while participants generally viewed inflation rising back to target over the medium term, several said "other persistent factors may be holding down inflation."

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