WASHINGTON (11/20/14)--Much of the debate during the Federal Open Market Committee's (FOMC) Oct. 28-29 meeting centered on whether it should remove the words "considerable time" from its forward guidance on interest rates, the meeting minutes showed.
Stripping forward guidance of that language could have indicated that the Federal Reserve's monetary policy-making body is getting closer to raising short-term interest rates.
The majority of committee members agreed with keeping the language, however, and several members outright opposed removing it because of the repercussions the change could have had on the market.
With the language retained, analysts continue to forecast the first hike will happen in the middle of next year (Economy.com Nov. 19).
"The Fed opted to leave in language to keep rates low for a 'considerable time,' but this language is on the way out as well," said James Bohnaker, Moody's analyst (Economy.com.), in reference to the fact that the FOMC also completely phased out its longstanding asset-purchase program, quantitative easing, during the meeting.
"We think they will drop this in December as a next step in preparing markets and the public for higher rates," Bohnaker added. "Waiting was the right move, as too much change would have been a lot to digest."
The FOMC also spent considerable time discussing inflation, and how it's not yet approaching the Fed's target number.
Committee members said continued low energy prices, especially oil prices, could cause disinflation in the coming months, but that this development was not overly concerning.
"The FOMC will keep a closer eye on all inflation, however," Moody's said.