FOMC Minutes: Inflation Still Below Target

In the minutes of their September 16th – 17th Federal Open Market Committee (FOMC) meeting, Fed officials outlined their decision to hold off on raising the federal funds rate, noting that although labor market conditions had improved considerably since the beginning of the year, headline inflation continued to run below target.

Members agreed that labor markets had improved over the year, with both payroll gains and the falling unemployment rate reaching a level close to their estimates of longer-run normal rates. Participants anticipated that economic activity would continue to expand at a rate which would cause further job growth and fewer underutilized resources. Inflation remained low, however, and members continued to expect declining oil prices and a strengthening dollar to exert downward pressure on inflation in the near term.

Although many members agreed that improvement in the labor market had met or would soon meet their criteria for raising interest rates, some committee members indicated that their confidence that inflation would return to the 2 percent objective over the medium term had not increased due to global economic and financial developments. However, most members did agree that inflation would move to the Committee’s 2 percent objective if economic activity continued to expand as expected.

During a press-conference immediately after the meeting in September, Federal Reserve Chair Janet Yellen stated that the possibility of raising rates was discussed, but ultimately it was decided that it was not the appropriate time. Chair Yellen continues to expect it will be appropriate to increase the federal funds rate later this year.

Of the voting members of the Committee, all but Richmond Federal Reserve President Jeffrey Lacker voted to hold the target rate between 0 and 25 basis points.

Read the FOMC minutes.