Many Federal Reserve officials are inclined to keep short-term interest rates near zero for longer, a record of the Fed’s January monetary policy meeting shows.
The minutes from the meeting held in Washington on Jan. 27 and Jan. 28 published by the central bank Wednesday reveal that “many participants” felt that the balance of risks and benefits tilted in favor of keeping interest rates at zero for longer.
Not all members agreed: “Some” said rates have been at zero for “a sufficient length of time, and that it might be appropriate to begin policy firming in the near term,” the minutes say. All members agreed, though, that they would continue to stress that their decisions will be based on what happens with the economy, jobs and inflation.
The Fed is nearing the decision to raise rates for the first time since late 2008, when it lowered them to zero in an effort to stimulate the economy.
At the January meeting, the Fed said it would be “patient” in waiting to tighten monetary policy and would wait for further data relating to jobs and inflation.
In December, Chairwoman Janet Yellen told reporters that she and the rest of the Fed’s monetary policy committee were not going to raise rates before the April meeting.
Most investors expect the decision to raise rates to come in the middle of the year.
Following strong jobs growth reported in January, some Fed officials suggested that that the decision could be made as early as June. Federal Reserve Bank of Cleveland President Loretta Mester, who is not a voting member of the monetary policy committee this year, said this week that the June meeting could be a “viable option” for an increase.
With inflation well below the Fed’s 2 percent target, however, the decision will be more complicated.
Some Fed officials cited too-low inflation as a reason to wait on rate hikes.
The minutes also show that Yellen and company are a little concerned about a market overreaction for whenever they stop saying that they will be “patient” in moving toward rate hikes. They also will look to make the Fed’s communications shorter once they finally implement higher interest rates and move away from the era of the financial crisis.
