WASHINGTON (10/9/15)--The majority of the Federal Open Market Committee (FOMC) still believes the Federal Reserve will hike interest rates this year, but the group was far from reaching a consensus to raise rates during its September meeting, the meeting minutes revealed.
Members of the FOMC, the Federal Reserve’s monetary policy-setting body, voiced concerns about the strength of the U.S. dollar relative to weakening international currencies and the subsequent disinflationary pressures (Economy.com Oct. 8).
“Once again, the minutes didn’t clarify what ‘some further improvement’ in the job market--which is a condition for raising rates--means,” said Ryan Sweet, Moody’s analyst (Economy.com). “There was a lengthy discussion of market-based expectations for the timing of the first rate hike. Therefore, if the Fed plans to raise rates in December and history is any guide, they will need to increase market expectations.”
The FOMC has two meetings left on its 2015 calendar: Oct. 27-28 and Dec. 15-16.
Despite stating that economic turmoil in China and the purported effect on the U.S. stock market would not have a huge impact on the overall economy, Fed officials said that it would be “prudent” to wait (MarketWatch Oct. 8).
In its policy statement, the Fed said that it sees the risks to the outlook for economic activity and the labor market as balanced, but that it would prefer to monitor developments abroad.
As for the opinions held by the members of the committee about when to raise rates, some said hiking interest rates prematurely would continue to hold down inflation, while others said that delaying the hike would risk a dangerous buildup of inflation.
Ultimately the Fed voted 9-1 to keep rates at their near-zero levels.