December 14, 2018

Interest Rates Likely to Rise in December, Recap of Fed Meeting Shows

The account emphasized that the central bank’s policy “was not on a preset course,” a phrase Mr. Powell also has used in recent remarks. The minutes said the Fed might remove language that predicts “further gradual increases” from its next policy statement to underscore the point that officials will make decisions based on the latest data. But the central bank also said most officials expect “further gradual increases.”

Mr. Trump has loudly complained that the Fed is throttling growth by raising rates. He renewed his attacks earlier this week, insisting in a pair of interviews that the Fed’s march toward higher rates posed a significant threat to the economy.

Some economists agree with Mr. Trump that the Fed should take a break from raising rates, noting that there is little sign that the economy is in danger of overheating. The Commerce Department reported on Thursday that a key measure of inflation rose by 1.78 percent over the 12 months ending in October, below the 2 percent annual pace that the central bank regards as optimal.

“The Fed’s mandate is price stability, and price growth has actually slowed,” Jason Furman, a Harvard economist who was chairman of President Barack Obama’s Council of Economic Advisers, wrote on Twitter on Wednesday. “I don’t understand why wages and prices are moving in different directions, it is very plausible that price growth will pick up again. But I don’t see much cost to a pause while we figure it out.”

Lawrence Summers, who served as Mr. Obama’s chief economic adviser, also has urged caution. In an interview with Fox Business Network scheduled to air on Friday, Mr. Summers said he disapproved of the way Mr. Trump was expressing his concerns, but he agreed with the substance. “I do think that there are more risks of overtightening than there are of under-tightening right now,” he said.

Mr. Powell has said that the central bank is moving forward with rate increases because the economy is in good health, and that the Fed is trying to strike a balance between allowing the current expansion to continue and ensuring that inflation remains under control.

The economy grew at a 3.5 percent annualized pace in the third quarter, job growth is strong and wages are rising, buttressing the intentions of Fed officials to continue raising rates.

Article source: https://www.nytimes.com/2018/11/29/business/economy/fed-minutes-november-meeting.html?partner=rss&emc=rss

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