Fed Still Concerned by Low Inflation as Rate Liftoff Nears

Federal Reserve officials signaled concern about stubbornly low inflation even as they indicated that an improving job market is bringing them closer to the first interest-rate increase in almost a decade.

Participants in the July 28-29 Federal Open Market Committee meeting said economic conditions “were approaching that point” where the economy could sustain a slight increase in borrowing costs, according to minutes of the meeting released in Washington on Wednesday.

Preserving their flexibility on the timing of rate liftoff, they also showed more concern about how soon they would hit their 2 percent inflation target, a goal they have missed for more than three years.

Their debate was silent on whether they should act in September or delay to await more evidence that inflation is heading higher. That discussion highlights a dilemma for the data-dependent FOMC: As the job market continues to deliver robust gains, with unemployment at 5.3 percent, holding interest rates near zero is harder to justify as the expansion enters its seventh year.

 

Bloomberg