FOMC Minutes Signal Continued Gradual Rate Increases

The Federal Open Market Committee judged that with the economy already very strong and inflation expected to run at 2 percent over the medium term, “it would likely be appropriate to continue gradually raising the target range for the federal funds rate to a setting that was at or somewhat above their estimates of its longer-run level by 2019 or 2020,” according to the minutes from the June 12-13 meeting. This would be a level that no longer seeks to boost the economy, but rather prevent it from overheating. During the meeting, committee members decided to raise rates to a range between 1.75 and 2 percent. The Committee will next meet July 31- August 1.

Committee members debated a few questions that will be at the forefront of setting policy over the next couple of years, including determining the neutral federal-funds rate, inflation expectations, and the importance of the shape of the yield curve.

The minutes also revealed growing concern over the recent developments in trade policy, as “most participants noted that uncertainty and risks associated with trade policy had intensified and were concerned that such uncertainty and risks eventually could have negative effects on business sentiment and investment spending.”

Read the FOMC minutes.