WASHINGTON (2/19/15)--The smart money might be on the Federal Open Market Committee (FOMC) raising short-term interest rates later, rather than sooner, as the minutes from the Jan. 27-28 FOMC meeting revealed Wednesday that the majority of policymakers favored taking their time in tightening monetary policy (MarketWatch Feb. 18).
The majority of analysts believe the Fed won't raise interest rates from their near-zero levels until at least the middle of the year, and the minutes may have only confirmed that timeline.
"Many participants indicated that their assessment of the balance of risks associated with the timing of the beginning of policy normalization had inclined them toward keeping the federal funds rate at its effective lower bound for a longer time," the minutes said.
"Many" of the policymakers said raising rates prematurely would hinder the recovery, while "several" said postponing the rate hike too long could risk high inflation, the minutes said (MarketWatch).
Discussion also centered on the language the FOMC will use moving forward when addressing the timing of the rate hike. For example, officials said they held concerns about the way investors might react once "patient" is dropped from subsequent policy statements.
Policymakers also discussed the ideal economic conditions they would like to see before raising interest rates. Committee members appear to prefer further improvement in the labor market and a clear trend that inflation is on its way to 2%--the Fed's target rate.
The FOMC's next meeting is scheduled for March 17-18.