US Federal Reserve minutes signal growing confidence in raising interest rates as US economy picks up
The Federal Reserve’s rate-setting committee signalled a more upbeat mood surrounding inflation in the minutes of its January meeting released today, with growing confidence in raising interest rates.
Most believed that inflation will pick up. It is likely to firm up expectations that the new Federal Reserve chairman Jerome Powell will raise interest rates next month.
“Members agreed that the strengthening in the near-term economic outlook increased the likelihood that a gradual upward trajectory of the federal funds rate would be appropriate,” the minutes said.
Officials altered their statement to point to “further gradual increases”, according to the record.
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A number of participants in the meeting said they had upped their growth forecasts since the month before, in light of “the strength of recent data on economic activity in the United States and abroad”, and the prospect that US tax changes could have a greater impact in the near term than previously thought.
“While participants continued to expect economic activity to expand at a moderate pace over the medium-term, they anticipated that the rate of economic growth in 2018 would exceed their estimates of its sustainable longer-run pace and that labour market conditions would strengthen further,” the record states.
“A majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate,” the minutes said.
At the 30-31 January meeting, the last under former Fed chair Janet Yellen, the Federal Open Market Committee did as expected and left interest rates unchanged.
Nearly all expected inflation to move up to the Committee’s two per cent objective over the medium-term, citing economic growth and a robust labour market. Last time round, fewer policymakers had been so confident.
The January meeting came ahead of US stock volatility, though the discussions reflect rising confidence around the economy since the December meeting when interest rates were hiked.
Read more: US Fed holds rates but highlights increased inflationary pressures