Fed Still Looking For Improvement Before Rate Hike, Minutes Show
Washington (Aug 20) US central bankers are awaiting further improvement in the economy before hiking rates from the current all-time lows, according to notes released Wednesday from last month's meeting of the Federal Reserve monetary policy body.
The rate-setting Federal Open Market Committee, led by Fed chairwoman Janet Yellen, left the unprecedented near-zero range on its benchmark interest rate unchanged, in a July 29 statement.
Notes from the meeting said that one member of the committee "indicated a readiness to take that step at this meeting but was willing to wait for additional data to confirm a judgement to raise the target range."
Overall, the panel "concluded that, although it had seen further progress, the economic conditions warranting an increase in the target range for the federal funds rate had not yet been met."
Members generally agreed that they need additional information on the outlook before deciding to implement an increase in the benchmark Federal Funds rate, which US banks pay on overnight loans. It has been unchanged since December 2008 - the depths of the last US recession. The central bank is eyeing employment and inflation as it considers its first tightening of monetary policy since the crisis.
Yellen and other fed policymakers have said publicly that they expect to take action this year, assuming the economy continues to improve. Wall Street expectations are for a rate hike as early as the central bank's next meeting on September 17.
In last month's monetary policy statement, the Fed said it expected to tighten monetary policy once it saw some further improvement in the labour market and was "reasonably confident" that inflation would move back to its 2% objective over the medium term.
Consumer inflation slowed last month in the US to 0.1%, after increases of 0.3% in June and 0.4% in May, the federal Burea of Labour Statistics reported earlier Wednesday. July was the sixth consecutive month of rising prices.
For the last 12 months, US prices were up 0.2%, amid sharply lower energy costs due to the crash in the oil market.
So-called core inflation, which excludes volatile food and energy prices, was 0.1%. For the last 12 months, the core rate was 1.8%.
The US economy regained momentum in the second quarter, expanding at an annual rate of 2.3% in the April-June period after a first-quarter slowdown, according to the federal Bureau of Economic Analysis last month.
The US has been in economic recovery since July 2009, with unemployment in July at a seven-year-low of 5.3%, down from a post-crisis peak of 10% in October 2009.