FOMC Minutes Show “Limited Amount” of Additional Tightening Likely

The Federal Open Market Committee (FOMC) highlighted that only a limited amount of interest rate increases would be appropriate, given current information on the economy. With the federal funds rate judged to be at or near the lower end of the range of estimates of the neutral rate, the Committee “could afford to be patient about further policy firming.” The Committee altered language in its post-meeting statement to better convey the data-dependency of decisions regarding the future stance of policy. “Monetary policy was not on a preset course,” read the minutes from the December 18-19 meeting. Officials stressed that if incoming data altered the economic outlook in a meaningful way, their policy outlook would change.

During the meeting, Committee members discussed the contrast between the strength of current economic conditions with increased concerns about downside risks. Recent financial market volatility and heightened concern over the global economic outlook were cited as two of the most prominent signs of risk. However, recent readings on household and business spending, inflation, and labor market conditions indicated continued momentum in the economy. During the meeting, committee members voted unanimously to raise the federal funds rate target range to 2.25 to 2.50 percent. The Committee will next meet January 29-30.

Read the FOMC minutes.