- Fed Minutes: Third Rate Hike Unlikely
Federal Reserve officials last month deliberated whether forces subduing prices were permanent or temporary, as many policymakers believe more evidence of price gains are necessary to support third rate hike this year.
“Many participants expressed concern that the low inflation readings this year might reflect not only transitory factors, but also the influence of developments that could prove more persistent,” according to minutes of the Sept. 19-20 meeting, released Wednesday in Washington.
Many of the policymakers said their decision whether to raise rates one more time this year would depend on incoming data. Especially inflation numbers to better determine if prices are rising towards their 2 percent target.
The central bank left interest rate unchanged in September but announced it would commence unwinding its $4.5 trillion balance sheet in October and projected a possible rate increase in the final quarter of the year.
However, the minutes showed the third rate hike depends on economic data to ascertain if inflation is within reach over the next couple of years.
“It was noted that some patience in removing policy accommodation while assessing trends in inflation was warranted,” the minutes read.
On the hurricanes, the statement said the Fed expects hurricanes to affect growth in the near time but not in the medium time.
According to the minutes “Fed policy makers expected third-quarter growth to be held down by the severe disruptions caused by the storms but to rebound beginning in the fourth quarter as rebuilding got under way and economic activity in the affected areas resumed.”
Also, the minutes suggest officials are concern with record low unemployment rate that has failed to spur wage growth but believe continuous labor market pressure will pressure prices in over time.
“Several expressed concern that the persistence of low rates of inflation might imply that the underlying trend was running below 2 percent, risking a decline in inflation expectations,” the minutes said. “If so, the appropriate policy path should take into account the need to bolster inflation expectations in order to ensure that inflation returned to 2 percent.”