WASHINGTON (1/8/15)--Weak inflation won't keep the Federal Reserve from normalizing monetary policy later this year, the meeting minutes from the Federal Open Market Committee's (FOMC) most recent policy meeting revealed.
Analysts had speculated whether low inflation levels would postpone short-term interest rate hikes from the central bank, but based on the minutes, released Wednesday, that doesn't appear to be the case (Economy.com Jan. 7).
"The minutes mentioned that the committee would still tighten monetary policy if core inflation was at its current level, but raising rates won't occur before the April 2015 meeting," said Ryan Sweet, Moody's analyst (Economy.com).
The revelation perhaps only adds further evidence that the Fed is gearing up to raise rates from their near-zero levels sometime around mid-year this year.
In its policy statement from the Dec. 16-17 meeting, the FOMC announced it would be "patient" when hiking interest rates, a subtle departure from the language the Fed had previously used regarding its plan on when to raise interest rates.
Though, the Fed hedged by saying "patient" was consistent with the "considerable time" language it used in previous policy statements.
Fed Chair Janet Yellen said in a press conference after last month's meeting that "patient" meant the Federal Reserve would unlikely "begin the normalization process for at last the next couple of meetings" (MarketWatch Jan. 7).
While Yellen may have the support of a number of committee members on this shift in forward guidance, three members of the FOMC dissented on the vote in December.
Perhaps the most notable dissenter was Minneapolis Fed President Narayana Kocherlakota, who has voiced concerns publicly about raising interest rates before inflation regains strength.