Federal Reserve officials at their most recent meeting left room for the possibility of interest rate increases before the end of the year, should economic conditions improve, according to minutes from the session released Wednesday.
“Several participants noted that their views of the appropriate range for the federal funds rate could shift in either direction based on incoming data and other developments,” the meeting summary stated. “Some participants indicated that if the economy evolved as they currently expected, with economic growth above its longer-run trend rate, they would likely judge it appropriate to raise the target range for the federal funds rate modestly later this year.”
The suggestion of a modest move implies one quarter-point adjustment in the current target range of 2.25 percent to 2.5 percent. Futures markets are currently pricing in no chance of an increase and in fact a considerable possibility that the Fed might choose to cut rates.
Through the first months of 2019, market participants have seen a more dovish Fed in favor of a “patient” approach to policy and one that will focus on economic data points like unemployment and inflation. That’s a switch from a central bank that hiked rates four times last year and until the March meeting had been indicating two more increases before the end of this year.
And these minutes noted that most members believe the central bank will likely keep keep interest rates the same for 2019.
“With regard to the outlook for monetary policy beyond this meeting, a majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year,” the minutes said.
Stock and bond prices showed very little movement following the release of the minutes.
Softening data on consumer spending and housing, a weak global picture and, importantly, muted inflation pressures have pushed the Fed to the sidelines.
At the March meeting, members noted the weak beginning to 2019, specifically citing household spending and business investment as metrics holding back broader economic growth. However, since that meeting, expectations for the first quarter have gotten more optimistic, with the Atlanta Fed’s GDP tracker going from 0.2 percent in the early part of March to around 2.1 percent now.