Higher-than-expected readings on inflation, along with expected changes in U.S. policy on trade and immigration, suggest to several Federal Open Market Committee members that it may take longer than originally anticipated for the Federal Reserve to reach its target of 2% inflation, according to minutes released today from the FOMC’s Dec. 17-18 meeting.
The FOMC voted in December to lower the target range for the federal funds rate by 25 basis points to 4.25%-4.5%. Cleveland Fed President Beth Hammack was the sole dissenter, saying she preferred to maintain the target range at its previous level. The minutes show that several FOMC participants believe the recent disinflationary trend may have temporarily stalled, or that it could stall. Some FOMC members said the risk of persistently elevated inflation had increased in recent months.
FOMC members indicated that the committee was at or near the point at which it would be appropriate to slow the pace of easing monetary policy, according to the minutes. Many also suggested that a variety of factors underlined the need for a careful approach to policy decisions in the future. “These factors included recent elevated inflation readings, the continuing strength of spending, reduced downside risks to the outlook for the labor market and economic activity, and increased upside risks to the outlook for inflation,” the minutes state.
