Federal Reserve officials in December debated the risks to the U.S. economic outlook, with some concerned about low inflation and others pointing to robust growth that was about to get a further boost from tax cuts.
Most participants reiterated support for “continuing a gradual approach to raising the target range” for the benchmark policy rate, according to minutes of the Federal Open Market Committee’s Dec. 12-13 meeting released Wednesday in Washington.
U.S. central bankers raised interest rates by a quarter percentage point and penciled in three more hikes for 2018, according to the median estimate.
Fed officials discussed several risks that could result in a faster pace of increases.
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“These risks included the possibility that inflation pressures could build unduly if output expanded well beyond its maximum sustainable level,” owing to fiscal stimulus or “accommodative” financial conditions, the minutes said.
Policy makers continued to wrestle over the outlook for inflation, the minutes showed. Economists were surprised in 2017 by the failure of wages and prices to rally despite a strengthening job market.
Even as unemployment dropped to 4.1 percent, the Fed’s preferred measure of inflation dipped to as low as 1.4 percent, before rebounding to 1.8 percent in the 12 months through November.