The majority of members of the Federal Reserve (Fed) estimated in late October that the economic conditions for the first increase in US interest rates “could well be achieved” in December, according to a document released Wednesday.
During the meeting of the Monetary Committee (FOMC) on 27 and 28 October, “most participants” felt that the conditions for an early normalization of monetary policy “could well be reached by the next meeting” on 15 and 16 December. Concerns about the global economy and market volatility “fell” even if sending “monitor,” say the minutes of the Fed.
Committee members reiterated that after an initial rise in rates, while they are close to zero since the 2008 financial crisis, the tightening of monetary policy would be “gradual”.
“The rhythm” of the new rate will eventually “most important” for the financial markets and the economy as the date of the initial rise in rates, insisted the Fed officials.
Most say they are confident that inflation back towards the 2% target that the Fed considers healthy for the economy while it is only 0.2% today.
They are encouraged by the “solid pace” of consumption and the slow recovery of the housing market.
They “provide that the economy will grow at a rate sufficient to enable an improved job market.” However, the slowdown in exports, especially “because of the weakness of the foreign operation and the appreciation of the dollar”, will hamper growth in the second half. In terms of inflation, the largesse of the global oil supply will weigh even “for a while” on energy prices.
In terms of employment, many were concerned about the slowdown in job creations in September which proved temporary with a strong rebound last month.
Two members of the FOMC were less optimistic, citing concerns about an increase of “premature” rate. Several have even considered it more prudent to consider “options” to provide new accommodative monetary policy measures “if the economic outlook were to weaken.”
Before the publication of this report which reflects the state of mind of the leaders of the Fed at the end of last month, several officials of the central bank reiterated Wednesday that they support a rate hike “soon” .
William Dudley, president of the New York Fed in particular that “begin to raise rates is a good thing, not a bad”. “This is a sign that the economy back to health, the Federal Reserve approaches the objectives of its dual mandate are the maximum sustainable employment and price stability,” said the permanent member of the Monetary Committee.
Asked about the economic impact of terrorist attacks in Paris, another official Jeffrey Lacker, president of the Richmond Fed, said it was “too early” to assess possible consequences. But he added that if there was an impact it would probably be “temporary”.