Many Fed policymakers urged patience on rate hikes: minutes

January 10, 2019 08:42
The US Federal Reserve can afford to be patient about further policy firming, many central bank policy makers suggested at the Fed's December meeting. Photo: Bloomberg

Several Federal Reserve policymakers said last month they could be patient about future interest rate increases, and a few did not support the central bank’s rate increase that month, Reuters reports, citing minutes from the Fed's Dec. 18-19 policy meeting.

The minutes, released on Wednesday, showed policymakers still thought the US economy was in good shape last month when the Federal Open Markets Committee raised its target range for overnight lending by a quarter percentage point.

But the minutes made clear that there were growing concerns over whipsawing financial markets and reports of a global slowdown, the report said.

“Many participants expressed the view that, especially in an environment of muted inflation pressures, the committee could afford to be patient about further policy firming,” according to the minutes.

“A number of” policymakers said that before changing interest rates again, it is important for the Fed to take stock of risks that had become “more pronounced in recent months.”

Central bankers, while signaling they were on track for two rate hikes in 2019, discussed the possibility of dropping altogether from future policy statements guidance on the outlook for future interest rate policy.

“Several participants expressed the view that it might be appropriate over upcoming meetings to remove forward guidance entirely and replace it with language emphasizing the data-dependent nature of policy decisions,” according to the minutes.

Policymakers also discussed at the December meeting a range of options for changes to the Fed’s framework for carrying out monetary policy, according to the minutes. Among these options, one included the possibility of holdings a larger “buffer” of securities.

Currently, the Fed is reducing the size of its balance sheet and its longer-run plan is to “hold no more securities than necessary to implement monetary policy efficiently and effectively.”

But policymakers discussed how “it might be appropriate to instead provide a buffer of reserves sufficient to ensure that the Federal Reserve operates consistently on the flat portion of the reserve demand curve,” according to the minutes.

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