The Federal Reserve is reluctantly moving away from its policy of hiking interest rates. Readers may recall I have discussed the ruinous impact these hikes are having on the global economy, particularly the emerging markets. Trump has repeatedly criticized the policy of rate hikes, and the Fed has finally started to suggest a pause may be coming:
Federal Reserve officials signaled plans to raise interest rates next month, but they appeared more tentative about maintaining a pace of quarterly increases after that, minutes of the central bank’s recent policy meeting show.
Almost all participants at the Nov. 7-8 meeting believed another rate increase “was likely to be warranted fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations,” the minutes said. The next Fed meeting is Dec. 18-19.
But officials discussed changing their postmeeting policy statement to emphasize their flexibility to respond to fresh economic developments as they weigh their rate moves next year.
Since January, the Fed’s statement has said officials expected that “further gradual increases” in short-term rates would be necessary. At their recent meeting, officials debated whether they should change that key phrase to stress their decisions would depend more on the most recent data.
“Many participants indicated that it might be appropriate at some upcoming meetings to begin to transition to statement language that placed greater emphasis on the evaluation of incoming data in assessing the economy and policy outlook,” the minutes said. “Such a change would help to convey the committee’s flexible approach in responding to changing economic circumstances.”
Officials flagged concerns about rising uncertainty related to trade and fiscal policy as well as the lagged effects of their own moves over the past two years to remove monetary stimulus, the minutes said. They also cited a possible slowdown in global growth, and a couple officials pointed to softening in inflation data.