Washington, Aug 18 (IANS) The US Federal Reserve officials were divided over when to raise interest rates again in July’s policy meeting as they held different views about US inflation outlook, showed minutes of the Fed’s latest monetary policy meeting released on Wednesday.
Some Fed officials preferred to wait for more evidence that US inflation would rise to the central bank’s objective of 2 per cent on a sustained basis, while other officials anticipated that economic conditions would soon warrant another rate increase, according to the minutes of the Fed’s July 26-27 meeting, Xinhua news agency reported.
“Members judged it appropriate to continue to leave their policy options open and maintain the flexibility to adjust the stance of policy based on incoming information and its implications for the Committee’s assessment of the outlook for economic activity, the labor market, and inflation, as well as the risks to the outlook,” the minutes said.
The Fed raised its target range for the federal funds rate by 25 basis points to 0.25-0.5 per cent in December, the first rate hike in nearly a decade.
But a slowdown in global economy since the start of the year and other global financial risks, including Britain’s referendum vote to leave the European Union in June, has made Fed policymakers cautious to hold off on any further rate hikes.
Fed’s July minutes showed that policymakers generally agreed that near-term risks to U.S. economic outlook had diminished due to “the prompt recovery in financial markets following the Brexit vote and the pickup in job gains in June.”
However, some officials were still concerned that longer-term global risks related to Brexit vote remained.
“Some noted that the UK vote, along with other developments abroad, still imparted significant uncertainty to the medium- to longer-term outlook for foreign economies, with possible consequences for the US outlook,” the minutes said, noting that the Fed would continue to closely monitor global economic and financial developments.
In regard to inflation outlook, some officials observed that core inflation had risen over the past year, while others expressed greater uncertainty about the trajectory of inflation.
“They saw little evidence that inflation was responding much to higher levels of resource utilization and suggested that the natural rate of unemployment, and the responsiveness of inflation to labor market conditions, may be lower than most current estimates. Several viewed the risks to their inflation forecasts as weighted to the downside,” the minutes said.
The minutes came a day after William Dudley, president of the New York Federal Reserve bank, said “it’s possible” to raise interest rates at the Fed’s September policy meeting.
But about 71 per cent of 62 economists surveyed by The Wall Street Journal this month believed that the Fed will wait until December to raise rates.