FOMC Minutes Signal Rate Increase in September

The Federal Open Market Committee judged that if the economy continues to perform in line with members’ outlook, “it would likely soon be appropriate to take another step in removing policy accommodation,” according to the minutes from the July 31-August 1 meeting. Committee members also noted that it would likely soon be appropriate to revise the characterization of the stance of monetary policy in the postmeeting statement, as “the stance of monetary policy remains accommodative” would no longer be appropriate with the federal funds rate moving closer to its neutral level. During the meeting, committee members decided to leave the federal funds rate unchanged at 1.75 and 2 percent. The Committee will next meet September 25-26.

Committee members continued to debate the importance of the flattening yield curve. There appears to be two camps, one that is concerned that an inversion of the curve has typically preceded recessions, and one that is less concerned due to the fact that factors from central bank asset purchases and strong global demand for safe assets may be giving off a false signal with inversion of the curve.

The minutes also revealed FOMC participants’ concern over the ongoing trade disagreements and proposed tariffs as a source of uncertainty and risk. The group noted the adverse effects on business investment, business sentiment, and employment.

Read the FOMC minutes.