A range of Federal Reserve policy-makers said last month they could be patient about future interest rate increases and a few did not support the central bank’s rate increase that month, minutes from their Dec. 18-19 policy meeting showed.
The release of the minutes on Wednesday came amid a rising chorus of policy-makers saying the Fed does not need to rush further rate increases amid concerns over financial-market stress and a slowing global economy.
The minutes showed policy-makers still thought the U.S. economy was in good shape last month when the Fed’s rate-setting Federal Open Markets Committee raised its target range for overnight lending by a quarter percentage point. Policy-makers also signalled at that meeting they were on track for two rate hikes in 2019.
But the minutes made clear that there were growing concerns over whipsawing financial markets and reports of a global slowdown.
“Many participants expressed the view that, especially in an environment of muted inflation pressures, the committee could afford to be patient about further policy firming,” according to the minutes.
The minutes also said “a number of” policy-makers said that before changing interest rates again, it was important for the Fed to take stock of risks that had become “more pronounced in recent months.”
After suffering significant losses in the fourth quarter, U.S. stock prices have continued to be turbulent.
America’s central bankers also discussed the possibility of dropping altogether from future policy statements guidance on the outlook for future interest-rate policy.
“Several participants expressed the view that it might be appropriate over upcoming meetings to remove forward guidance entirely and replace it with language emphasizing the data-dependent nature of policy decisions,” according to the minutes.
Since the December meeting, a rising number of policy-makers, including Fed chairman Jerome Powell, have argued for patience. On Wednesday, several Fed officials said they would be cautious about any further increases in interest rates.
Policy-makers also discussed at the December meeting a range of options for changes to the Fed’s framework for carrying out monetary policy, according to the minutes. Among these options, one included the possibility of holdings a larger “buffer” of securities.
Currently, the Fed is reducing the size of its balance sheet and its longer-run plan is to “hold no more securities than necessary to implement monetary policy efficiently and effectively.”
But policy-makers discussed how “it might be appropriate to instead provide a buffer of reserves sufficient to ensure that the Federal Reserve operates consistently on the flat portion of the reserve demand curve,” according to the minutes. Some policy-makers said the Fed could also slow the pace of decline in reserves as it approaches the desired longer-run level.