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Fed Minutes Signal December Interest Rate Increase

Fed Minutes Signal December Interest Rate Increase


WASHINGTON — The Federal Reserve is poised to raise interest rates at its next policymaking session in mid-December, according to minutes of the central bank’s last meeting in early November published on Thursday.

The account said “almost all” Fed officials also expected to continue raising the benchmark rate next year.

President Trump has warned repeatedly that the Fed is making a mistake by raising rates, and that higher rates are curtailing growth. The minutes published Thursday did not mention the president’s concerns.

The Fed’s chairman, Jerome H. Powell, has said that the central bank is moving forward with rate increases because the economy is in very good health, and that policymakers are trying to strike a balance between allowing the current economic expansion to continue and preventing inflation from rising.

The Fed’s policy arm, the Federal Open Market Committee, last raised its benchmark rate in September, to a range of 2 percent to 2.25 percent, then left the rate unchanged at the November meeting. The central bank is widely expected to increase the rate by a quarter of a percentage point in December.

“Almost all participants expressed the view that another increase in the target range for the federal funds rate was likely to be warranted fairly soon,” barring unpleasant developments, according to the account, which was published after a standard delay of three weeks since the November meeting.

The account emphasized that policy “was not on a preset course,” a phrase Mr. Powell also has used in recent remarks. The minutes said the Fed might remove language that predicts “further gradual increases” from its next policy statement to underscore the point that officials will make decisions based on the latest data. But the central bank also said most officials expect “further gradual increases.”

The economy grew at a 3.5 percent annual pace in the third quarter, job growth is strong and wages are rising, buttressing the intentions of Fed officials to continue raising rates.

But some officials reported increased uncertainty about the economic outlook, the account said.

It noted “some signs of slowing in interest-sensitive sectors” like housing and car sales. The minutes also noted the impact of trade restrictions on agriculture.

Opponents of continued rate increases have said there is still little sign that the economy is overheating. The Commerce Department reported on Thursday that a key measure of inflation rose by 1.78 percent over the 12 months ending in October, below the 2 percent annual pace that the Fed regards as optimal.

Fed officials at the November meeting also considered changes in the mechanics of monetary policy. After the financial crisis, the Fed adopted a new system for raising or lowering interest rates. Officials are still debating whether to keep that approach, but the account suggested that they are satisfied with its performance and that few officials saw a clear reason to return to the older system.

A key difference under the new system is that the Fed pays interest on the balances that commercial banks maintain in accounts at the central bank. Some members of Congress have criticized the interest payments, which amount to billions of dollars each year. But Fed officials say the new system has improved the Fed’s ability to influence financial and economic conditions.

The Fed is considering a small change to reduce the interest rate paid on reserves. That rate initially was set at the same level as the top of the target range for the benchmark rate, currently 2.25 percent.

Earlier this year, the Fed reduced the interest rate on reserves by 0.05 percentage points in an effort to keep the benchmark rate closer to the midpoint of its range. The minutes said Fed officials agreed to further reduce the interest rate on reserves, and to act if necessary before the December meeting.



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