Federal Reserve officials mostly thought last month that an increase in interest rates would be justified in December, notes from the central bank’s November meeting released Wednesday show.
“Most participants” at the meeting believed that it would be appropriate to raise the Fed’s interest rate target “relatively soon,” the minutes revealed.
The minutes are likely to cement investor expectations for the Janet Yellen-led Fed to raise its interest rate target at its next meeting, scheduled for Dec. 13-14. Following Wednesday’s release, bond market prices suggested that investors saw nearly a 95 percent change of a rate hike in December.
Such a move would be only the second Fed rate hike since it lowered its target to zero to combat the financial crisis. The central bank voted in December to raise the rate from zero to between 0.25-0.5 percent.
Some Fed officials warned at the November meeting that the Fed could hurt its own credibility if it doesn’t raise rates in December. And a few advocated raising rates then. Two voting members of the commitee — Esther George of the Kansas City Fed and Loretta Mester of the Cleveland Fed — voted against the committee’s decision not to raise rates, both citing low unemployment.
At 4.9 percent in October, the unemployment rate is very close to the rate that Fed officials think signals a fully health economy. If unemployment dips much further, in the Fed’s view, too-high inflation could result.
Nevertheless, Yellen has suggested that, given that inflation remains low, it is worth leaving rates lower for longer in order to see if a “high-pressure” economy could bring more workers off the sidelines and into jobs.
