Minutes of the Federal Reserve’s December meeting revealed policy makers took a more cautious approach to further rate increases than their statement indicated.
“Many participants expressed the view that, especially in an environment of muted inflation pressures, the committee could afford to be patient about further policy firming,’’ the central bank said in minutes of its Dec. 18-19 policy meeting released Wednesday in Washington.
The vote to hike rates was unanimous but the minutes showed “a few participants” favored no change. The minutes showed the committee was attentive to recent financial-market volatility and risks to the outlook.
“Participants expressed that recent developments, including the volatility in financial markets and the increased concerns about global growth, made the appropriate extent and timing of future policy firming less clear than earlier,” the minutes said.
Officials signaled that further gradual increases in the policy rate were likely, though several participants said that it might be appropriate “over upcoming meetings to remove forward guidance entirely.” They suggested replacing it with language emphasizing “the data-dependent nature” of monetary-policy decisions.
The meeting was the most significant of Jerome Powell’s chairmanship so far. Officials raised rates and projected two more hikes in 2019, ignoring President Donald Trump’s demands for a halt and steep losses in the stock market, which deepened following their decision.
The minutes showed that officials voting at the meeting included language referring to “some further gradual” increases to indicate that they “judged that a relatively limited amount of additional tightening likely would be appropriate.”
Last month became the worst December for U.S. stocks since the Great Depression, with the rout continuing after Bloomberg News reported that Trump had discussed firing Powell. There was no direct reference to Trump in the minutes.
Officials agreed that policy was not on a pre-set path. “If incoming information prompted meaningful reassessments of the economic outlook and attendant risks, either to the upside or the downside, their policy outlook would change,” the minutes said.