FOMC Minutes

February 21, 2018

Minutes from the last Federal Open Market Committee on January 30-31, which also was the last one of the Janet Yellen era, note that economic growth in 2018 appears likely to be somewhat faster than imagined at the prior meeting. However, no urgency is expressed to speed up the likely progression of future interest rate hikes. Until new forecasts are released at the next review, which will be followed by incoming Jerome Powell’s first press conference, the prevailing and still-unrevised signal from the December meeting calls for three increases as most likely in 2018. Regarding risks, however, four moves seems more probable than two this year. FOMC members’ discussion of inflation was summarized in the following excerpt:

Almost all participants continued to anticipate that inflation
would move up to the Committee’s 2 percent objective
over the medium term as economic growth remained
above trend and the labor market stayed strong;
several commented that recent developments had increased
their confidence in the outlook for further progress
toward the Committee’s 2 percent inflation objective.
A couple noted that a step-up in the pace of economic
growth could tighten labor market conditions
even more than they currently anticipated, posing risks
to inflation and financial stability associated with substantially
overshooting full employment. However, some participants saw an appreciable risk that inflation would continue to fall short of the Committee’s objective. These participants saw little solid evidence that the strength of economic activity and the labor market was
showing through to significant wage or inflation pressures.
They judged that the Committee could afford to
be patient in deciding whether to increase the target
range for the federal funds rate in order to support further
strengthening of the labor market and allow participants
to assess whether incoming information on inflation
showed that it was solidly on a track toward the
Committee’s objective.

The personnel comprising the FOMC is transitioning unusually rapidly. As always, the start of a new calendar meant a rotation of district presidents with voting privileges. Former Vice Chair Fisher is now gone, and New York Federal Reserve President Dudley, whose position unlike those of all other 11 district presidents bestows permanent voting rights on the committee, will be stepping down later this year. There will also be some vacancies on the Board of Governors for President Trump to fill.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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