Federal Reserve officials debated during their policy meeting in July whether they should raise interest rates sooner than expected amid the strengthening economic recovery, but they were restrained by lingering doubts on whether the gains would persist, the Wall Street Journal reported, citing minutes of the meeting released on Wednesday.
Some Fed officials said the surprisingly fast decline in the unemployment rate and pickup in consumer prices warrant moving toward tighter credit soon, but they were outnumbered at the meeting by those who wanted more evidence before signaling that rate increases are on the way, according to the newspaper.
“Most participants indicated that any change in their expectations for the appropriate timing of the first increase in the federal funs rate would depend on further information on the trajectories of economic activity, the labor market, and inflation,” the minutes said.
Short-term rates have been held near zero since December 2008. Most Fed officials believe they can wait until 2015 before raising rates and have encouraged a perception in financial markets that rate increases won’t start until the middle of the year, the Journal said.
The market will now look for clues in a speech by Fed chairwoman Janet Yellen at a Fed symposium in Jackson Hole, Wyoming, on Friday. Yellen is expected to give her latest views on the labor market.
The Fed’s next move depends largely on how the economy performs in the second half. The jobless rate fell to 6.2 percent in July, from 7.3 percent a year earlier. Inflation has picked up after running below the Fed’s 2 percent objective for two years in a row. The economy grew at a 4 percent annual rate in the second quarter after contracting in the first three months, the report said.
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