Minutes from the Fed's September meeting are out, and Fed officials agreed that the central bank should "proceed cautiously" in its interest rate decisions, while acknowledging that monetary policy should remain restrictive for some time.
According to the Wall Street Journal Chinese website reported on the 12th, in terms of interest rates, the minutes of the meeting showed that Federal Reserve officials were inclined to the possibility of raising interest rates again. "Most" participants thought it would be appropriate to raise the target for the federal funds rate one more time in the future, and a few saw no need for additional increases. If long-term Treasury yields keep rising, Fed officials may not need to raise rates again this year.
The minutes show that Fed officials are beginning to consider how long they need to keep interest rates at or near current levels before cutting them. Some officials said the focus of interest rate decisions and public communications should shift from "how high to raise the policy rate" to "how long to keep the policy rate at a restrictive level."
While officials expect inflation to continue to slow in coming months, many of them believe that if the forecasts are wrong, it will be because inflation is higher than expected, which could require tighter policy. At the same time, officials also saw a heightened risk of economic growth falling short of expectations, although it was not as bad as economists had expected, who had expected growth to slow this year.
Separately, the Financial Times reported that members of the Federal Open Market Committee struck a cautious tone, saying there were "two-sided" risks in pursuing the 2 per cent inflation target.
Double-sided risks refer to the risk of tightening too little, which would keep inflation high, or too much, which could sharply curb economic growth. However, Fed officials acknowledged that policy "should remain restrictive for some time until the committee is confident that inflation is declining consistently toward its objective".
There were two references to caution in the minutes, which said that all participants agreed that the committee could proceed with caution. They also said they supported "proceeding cautiously in determining the extent of additional policy tightening that might be appropriate."