US Fed FOMC Minutes Show Higher Rates Could Come Even With Low Inflation

Inflation wouldn’t have to move off its current subdued levels for the Federal Reserve to start hiking rates, according to minutes released Wednesday from its most recent meeting.
The December gathering of Federal Open Market Committee did not produce a rate hike, but some members indicated that conditions are changing. Minutes indicated, however, that using the world “patient” in the statement following the meeting would signal that the Fed wasn’t ready to hike for at least the next couple of meetings—a term Chair Janet Yellen told the media afterward indeed meant two.

“Most participants agreed that it would be useful to state that the Committee judges that it can be patient in beginning to normalize the stance of monetary policy; they noted that such language would provide more flexibility to adjust policy in response to incoming information than the previous language, which had tied the beginning of normalization to the end of the asset purchase program,” the minutes said.

Wall Street consensus is that the central bank likely will begin raising rates off near-zero levels by midyear, though low inflation levels have driven speculation that it could take even longer.

Some members pushed back, saying the Fed should allow itself even more flexibility to move as economic conditions warranted.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza