Fed Considers Rate Hike, Minutes Show
Minutes from the most recent Federal Reserve Open Market committee meeting indicate that policymakers are optimistic about the economy but are concerned about a premature departure from their accommodative monetary out of fear that doing so might stifle the economy’s current growth trajectory. With regard to monetary policy their minutes state, “In their discussion of monetary policy for the period ahead, members judged that information received since the Federal Open Market Committee, the FOMC, met in December, indicated that economic activity had been expanding at a solid pace. Labor market conditions had improved further, with strong job gains and a lower unemployment rate; numerous labor market indicators suggested that the underutilization of labor resources was continuing to diminish. Household spending was rising moderately; recent declines in energy prices had boosted household purchasing power. Business fixed investment was advancing, while the recovery in the housing sector remained slow. Inflation had declined further below the Committee’s longer-run objective, largely reflecting declines in energy prices, and was expected to decline further in the near term.” They went on to state, “The Committee agreed to maintain the target range for the federal funds rate at 0 to ¼ percent and to reaffirm the indication in the statement that the Committee’s decision about how long to maintain the current target range for the federal funds rate would depend on its assessment of actual and expected progress toward its objectives of maximum employment and 2 percent inflation.” As for when they will begin to implement a less accomodative economic policy, members were reluctant to identify which specific factors will influence their decisions however they did state, “a number of participants suggested that they would need to see further improvement in labor market conditions and data pointing to continued growth in real activity at a pace sufficient to support additional labor market gain before beginning policy normalization.”
