Fed To Hold Off On Interest Rate Hikes

Jeannie Matthews
May 26, 2019

The minutes also said that the Fed chose to take a patient approach about hiking rates this year even if global economic and financial conditions improve.

'Other sources of uncertainty remained. "In light of global economic and financial developments as well as muted inflation pressures, participants generally agreed that a patient approach to determining future adjustments to the target range for the federal funds rate remained appropriate".

"A number of participants observed that some of the risks and uncertainties that had surrounded their outlooks earlier in the year had moderated, including those related to the global economic outlook, Brexit, and trade negotiations", the Fed minutes said.

Still, Dallas Federal Reserve president Robert Kaplan in a Wednesday interview on Fox Business said that to move rates higher or lower, "I would need to see something compelling.We are basically at the right policy setting".

"China has a lot to gain form establishing credibility on trade".

"A few" Fed officials were more concerned by the risk prices could suddenly shoot higher, while "a few other participants" said persistent low inflation and moderate wage increases indicate the risk was not as great.

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Earlier on Wednesday, New York Fed President John Williams said at a press briefing that there is not now a strong argument for changing rates.

One of the more "dovish" rate-setters at the Federal Reserve said on Wednesday that the United States central bank may want to consider interest rate cuts if inflation readings continue to disappoint.

Both a tight labor market and concern among businesses about their profit margins should boost inflation as the year unfolds, San Francisco Fed President Mary Daly said on Thursday.

Bullard focused in his speech on two challenges facing the Fed, the possibility that trade disputes "could become entrenched" and that the monetary authority might fall short of its target for 2.0% inflation in 2019, which would come on top of seven years of inflation running mostly below target.

Still, the minutes from the most recent meeting showed a more buoyant tone.

The minutes also revealed a split among the officials about the outlook for inflation, which has stubbornly remained below the Fed's two percent target despite a strong economy and low unemployment rate. There is going to have to be significant deterioration in growth and a notable dip in inflation that's not due to transitory factors to cut rates.

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