The Central Bankers of the US Federal Reserve have held a long debate about the prospects for accelerating inflation and the path of future interest rate increases, according to the report of the last Fed meeting. Fed announced that it will begin this month to reduce its huge bond portfolio, mainly gained after the financial crisis. The report also shows that central bankers remain broadly optimistic despite the economic impact of the latest hurricanes.
“Many participants have expressed concerns that weak inflation this year may reflect the effects of developments that may prove more lasting. It was noted that some patience in policy tightening should be ensured while inflation trends are being assessed”, says the report of Fed.
Some central bankers have said they will focus on incoming inflation figures over the next few months when they decide on future interest rates.
However, many central bankers still think that another increase in interest rates this year “is likely to be guaranteed”.
Fed Chairman Janet Yellen has repeatedly stated after the meeting that concerns about the inflation, which has not reached the Fed’s target of 2%, are increasing. However, Yellen and other key representatives have clearly shown that they are expecting a gradual rise in interest rates to continue with the strength of the economy as a whole and the continuing tightening of the labor market.
Several central bankers also note that the interpretation of inflation data over the next few months is likely to be hampered by the temporary increase in energy costs and other product prices, as a result of hurricane interruptions. US Federal Reserve representatives largely ignored the sluggish employment report for September last week, releasing the fall in the impact of hurricanes Harvey and Irma. At the same time, however, annual wage growth has accelerated to 2.9%, and unemployment has fallen to 4.2%, which is the lowest level over 16 and a half years.
This may encourage central bankers, who generally predict that tightening the labor market will soon increase wages.
“Most participants expected rising wage growth over time, as the labor market is tightening even more. Some have warned that wider acceleration of pay may have already begun”, says also the protocol.
The Fed has two more planned meetings of the Monetary Policy Committee by the end of the year. Currently, investors expect the Fed to raise interest rates again in December.