The Federal Open Market Committee (FOMC) determined that further gradual increases of the federal funds rate “would most likely be consistent with a sustained economic expansion, strong labor market conditions, and inflation near 2 percent over the medium term,” according to the minutes from the September 25-26 meeting. Officials agreed to remove the sentence in the postmeeting statement describing that “the stance of monetary policy remains accommodative.” Among the reasons for doing so was that rates are moving closer to the estimates of the neutral policy rate, which is currently seen to be around 3 percent.
Committee members are in general agreement on gradual rate hikes to reach a neutral level that will neither slow nor accelerate growth, but are more split on what path to take from there. Some participants expect rates to move past neutral for some time in order to keep the economy from overheating, while a couple other members prefer to see clear evidence of rising inflation before committing to more restrictive policy. During the meeting, committee members decided to increase the federal funds rate target range to 2 to 2.25 percent. The Committee will next meet November 7-8.
Read the FOMC minutes.