Date
24 June 2017
The Federal Reserve has moved toward a consensus on a proposal to start gradually shrinking its US$4.5 trillion in holdings of Treasury and mortgage securities later in the year. Photo: AP
The Federal Reserve has moved toward a consensus on a proposal to start gradually shrinking its US$4.5 trillion in holdings of Treasury and mortgage securities later in the year. Photo: AP

Fed minutes signal officials ready to raise rates again soon

Federal Reserve officials expected at their policy meeting this month that it would “soon be appropriate” to raise short-term interest rates, a signal the U.S. central bank could move in June at its next gathering, the Wall Street Journal reports.

The Fed also moved toward a consensus on a proposal to start gradually shrinking its US$4.5 trillion in holdings of Treasury and mortgage securities later in the year, according to minutes of the gathering released Wednesday. Under the approach discussed, they would allow increasing amounts of those securities to mature over time, without reinvesting the proceeds.

Fed officials left their benchmark short-term interest rates unchanged within a range between 0.75 percent and 1 percent at the meeting May 2-3. Several Fed officials in recent weeks have said they believe the economy will still be strong enough to warrant two more quarter-percentage-point rate increases this year.

Officials were inclined to stick to that scenario even though the economy appeared to stumble in the first quarter, the minutes showed. Officials saw that slowdown as likely to be transitory. And while some expressed concern about recent softness in inflation, it wasn’t enough to knock them off track.

Their next meeting is June 13-14, which will be followed by a press conference with Fed chairwoman Janet Yellen.

“Most participants judged that if economic information came in about in line with their expectations, it would soon be appropriate for the committee to take another step” in raising rates, the minutes said.

Before the minutes were released, “we thought there was a pretty good chance” of a rate increase in June, said Michael Feroli, chief US economist at J.P. Morgan Chase & Co. “Saying ‘soon’ says that that is the committee’s intention, as well. They said ‘soon’ in the January minutes, and they went in March.”

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