Federal Reserve officials held off of a rate hike in September as many
thought downside risks had increased, according to minutes of the
meeting released Thursday. Officials decided it would be "prudent" to
wait, even though many thought that the weaker growth outlook for China
that emerged in August and the subsequent drop in stock prices around
the world would "likely" have a small effect on the economy. Some voting
members of the Fed policy committee said that these global developments
did not increase their confidence that inflation would return to the
central bank's 2% target. Fed officials were split, with some worried
that hiking rates too soon would push inflation lower and others saying
that delaying a hike for much longer would risk an undesirable buildup
of inflation. In the end, the Fed voted 9 to 1 to hold rates steady.
Highlights of the Minutes from the Sept 16-17 Fed meeting:
- Fed officials said 'prudent' to wait for clarity on the outlook
- Most participants felt conditions for hiking rates had already been met or would be met by the end of the year
- Some
participants warned that a 'premature' rate hike could hurt the Fed's
credibility if inflation stayed low, while some expressed concerns about
delaying rate increases
- Many participants saw global conditions as increasing downside risks to UK
- Expressed
concern over the impact of global conditions on US but felt the effects
on inflation would be passing and on growth would be small
- Several participants worried that inflation could be dragged even lower by oil prices and the high value of the dollar
- A couple expressed 'unease' that inflation expectations might also be dropping
- Full text of the Minutes
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