FOMC minutes: Members agreed rates should stay restrictive for some time

The Federal Open Market Committee released its minutes from its September 19-20 meeting, revealing that officials saw risks to achieving goals as more two-sided. Most members continued to see upside risks to inflation. The Fed decided to maintain the federal funds rate within the range of 5.25% to 5.5%, with staff projections suggesting another rate hike before the end of the year.

The next FOMC decision is on November 1. Participants expected real GDP growth to slow in the near term, and they judged the current stance of monetary policy restrictive and restraining the economy as intended. They also noted that current inflation remained unacceptably high, although it had moderated somewhat over the past year.

The labour market was tight, but supply and demand conditions were continuing to come into better balance. There was still a high degree of uncertainty surrounding the economic outlook, with an intensification of the autoworkers’ strike posing both an upside risk to inflation and a downside risk to activity.

A majority of participants pointed to upside risks to inflation from rising energy prices that could undo some of the recent disinflation or the risk that inflation would prove more persistent than expected. Almost all participants judged it appropriate to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent at this meeting.

The majority of participants believed that one more increase in the target federal funds rate would likely be appropriate at a subsequent meeting, while some said that no additional increases would likely be necessary. The majority of participants believed that risks to the accomplishment of the Committee’s objectives had increased due to the stance of monetary policy in restrictive area.

However, the majority of participants continued to see upside risks to inflation, such as the imbalance between aggregate demand and supply lasting longer than anticipated, risks from the global oil markets, the possibility of upside shocks to food prices, the effects of a strong housing market on shelter inflation, and the possibility of more modest drops in the prices of goods.