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Home » Fed minutes reveal ‘cautious’ approach to rate hike

Fed minutes reveal ‘cautious’ approach to rate hike

April 7, 2016

WASHINGTON (4/7/16)--Members of the Federal Open Market Committee had mixed responses to the idea of an interest-rate hike at its last meeting, minutes from the March 15-16 meeting revealed.

Looking ahead to April, the Federal Reserve’s monetary policy-making body “judged that the headwinds restraining growth and holding down the neutral rate of interest were likely to subside only slowly,” the minutes said.

Several noted that a cautious approach would be “prudent” or that raising the target range as soon as April “would signal a sense of urgency they did not think appropriate.” One, however, suggested a 25-basis point increase was warranted in March.

Since the January meeting, economic activity had been expanding at a “moderate pace,” something the committee expected to continue; however, they saw “global economic and financial developments as continuing to pose risks,” giving pause to increasing the fed funds rate.

The minutes showed a “clear split” inside the Fed over two main issues, said Ian Shepherdson, chief economist at Pantheon Macroeconomics (ABC News April 6). One, how quickly inflation will rise to the Fed's 2% target, and two, how much the overall economy will be hurt by global weakness. Shepherdson said he believed the Fed will rate interest rates in June.

The committee’s next meeting is April 26-27.

KEYWORDS FOMC
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