Date
23 May 2017
The US Federal Reserve is laying the groundwork for another hike in short-term borrowing costs. Photo: Bloomberg
The US Federal Reserve is laying the groundwork for another hike in short-term borrowing costs. Photo: Bloomberg

Fed officials see rate hike ‘fairly soon’

Federal Reserve officials expect another hike in the US benchmark interest rate “fairly soon” due to an improving economy and anticipated inflationary pressures.

According to minutes released Wednesday from the central bank’s last policy meeting, some officials were of the view that it might be appropriate to move “potentially at an upcoming meeting”, the Wall Street Journal reports.

The discussions from the Jan. 31-Feb. 1 meeting suggest that the officials could consider raising their key short-term interest rate as soon as their next policy meeting, which is scheduled for March 14-15.

Several policy makers raised the possibility of moving more aggressively than expected should inflation surge and the unemployment rate fall too much, the report said.

Fed officials also anticipated “heightened uncertainty” from the Trump administration’s plans for tax cuts and spending increases.

The Federal Open Market Committee, the central bank’s rate-setting policy committee, voted unanimously at the last meeting to hold rates steady.

The statement released after the meeting offered no hint about whether it was likely to move in March.

Behind closed doors, however, officials were laying the groundwork for raising short-term borrowing costs, the Journal noted.

After raising rates just once in each of the past two years, some officials were concerned that markets did not believe policy makers in December when they penciled in three quarter-percentage-point rate increases for 2017.

The Fed’s communications “might be misunderstood as a commitment to only one or two rate hikes per year,” they warned.

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