With the inflation moving toward the Federal Reserve’s 2% target and the economy remaining near maximum employment, Federal Open Market Committee members anticipate that it may be appropriate to adopt “a more neutral stance” on monetary policy over time, according to minutes released today of the FOMC’s Nov. 6-7 meeting.
The FOMC lowered the target range for the federal funds rate by 25 basis points at its last meeting, to 4.5% to 4.75%. That cut followed the committee’s decision in September to trim rates by 50 basis points. The November minutes show that nearly all committee members agreed that with the progress on lowering inflation and the overall strength of the labor market, their committee’s employment and inflation goals were roughly in balance.
Still, the committee members noted that monetary policy “would need to balance the risks of easing policy too quickly, thereby possibly hindering further progress on inflation, with the risks of easing policy too slowly, thereby unduly weakening economic activity and employment.”
“Many participants observed that uncertainties concerning the level of the neutral rate of interest complicated the assessment of the degree of restrictiveness of monetary policy and, in their view, made it appropriate to reduce policy restraint gradually,” according to the minutes.
