WASHINGTON-Federal Reserve officials at their last meeting signaled that they were likely to raise interest rates next month and discussed in greater detail their concerns about how long-term trade disputes could interfere with economic growth.
If the economy is executed in line with current expectations, "it would probably soon be appropriate to take a step in" raising rates, "said the FED protocol on July 31-Aug. 1 meeting, released Wednesday.
Bold held prices rose steadily at the meeting, increasing its comparison short-term rate in June to a range between 1.75% and 2%, the second this year's increase. In June, most of the officials as penciled increased a total of at least four interest rates this year.
At the last meeting, Fed officials discussed the release of the language from their statement after meeting, which for years described monetary policy as "accommodating" or low amounts to stimulate economic activity. Most officials have signaled that they are keen to raise interest rates to a level that does not track or slow down growth, but there is great uncertainty about what constitutes this so-called neutral rate.
When Fed gradually raises its re interest rate, the description of interest rate policy will be courageous to "at some point quite soon … no longer be appropriate," said the protocol.
One reason for calling back this guidance is that it could "convey a false sense of precision," said the protocol, especially in an environment where Fed has dramatically expanded its bond portfolio and where fiscal stimulus has increased.
President Trump signaled his Fed-rate accident increased more than a week before officials met and he repeated these concerns in comments to donors and journalists in recent days. The protocol did not disclose any discussion about these comments, which most Fed officials are likely to ignore.
Nevertheless, the President's criticisms point to a potential collision between the White House and the Fed during the current, sensitive period of raising interest rates to a level that deliberately can slow growth to prevent the economy from overheating.
Such episodes were not uncommon before the early 1
The Fed has slowly and predictably raised interest rates this year as the economy has developed to a large extent in line with its expectations, but Wednesday's protocol shows how trade uncertainties threaten US companies and federal officials.
Officials last month reported that companies in their districts had not yet reduced planned investments due to tariffs, "but it could make it possible for trade tensions to be resolved soon," said the protocol.
All officials at the meeting pointed to trade disputes as "an important source of uncertainty and risks". They signaled a long list of concerns: A lengthy dispute would hurt corporate investment, emotions and employment. This would reduce the purchasing power of US households. And it can interfere with supply chains that would further worsen the already weak productivity.
Other risks meant a deterioration in the housing market, a sharp rise in oil prices or a sharp slowdown in emerging market economies, the protocol noted.
Minutes gave some clues about how much longer Fed officials think they will need to raise interest rates. They reprized familiar debates about whether or why wages would soon recover. Some officials believed that inflation would move over Fed's 2% target for a while, but others pointed to inflation expectations that would be below levels consistent with the target.
The protocol said that some officials had become more convinced that the Fed should maintain 2% inflation. Several officials reported companies "had greater scope compared to recent years to raise prices due to strong demand or increased input costs", including from tariffs or higher fuel and freight rates.
Some officials continued to raise concerns that the economy would be overheated, giving room for higher inflation or financial imbalances that would lead to a recession.
Separately, the Fed Chairman Jerome Powell told the last meeting that he would resume a discussion this autumn about how the Fed is making its decision-making decisions. Fed officials did not solve this issue last year when they agreed on a plan to reduce their 4.5 billion portfolio of bonds and other assets.
The portfolio has shrunk to around 4.3 trillion dollars, and the debate about how Fed will set its reference rate will help determine how long they will continue the rounding. This process drains bank deposits in the central bank, called reserves, from the system. At some point, scarce reserves can put pressure on federal funds.
If officials return to a system similar to one used before the 2008 financial crisis, it would require fewer reserves and a small portfolio, which means that the settlement of the portfolio could continue well in the next decade. If they retain the current framework, they would have more reserves and a larger portfolio, which means that the runoff can end in the next few years.