Fed Still Concerned About Weak Inflation, Minutes Reveal

Stubbornly weak inflation could slow the pace of interest rate hikes in 2018, the minutes of the most recent Federal Reserve meeting revealed today.

At that meeting, the Fed voted to increase its benchmark interest rate a quarter point to 1.25 percent to 1.5 percent.

“The information reviewed for the December 12-13 meeting indicated that labor market conditions continued to strengthen through November and suggested that real gross domestic product (GDP) was rising at a solid pace in the second half of 2017,” the minutes said.

The Fed also said it raised its economic projections due to the tax reforms passed by the Trump Administration.

“Most participants indicated that prospective changes in federal tax policy were a factor that led them to boost their projections of real GDP growth over the next couple of years,” the minutes stated.

Holiday spending was “strong” in several Fed districts, as “many participants expected the proposed cuts in personal taxes to provide some boost to consumer spending.”

However, the Fed’s preferred measure of inflation remained below 2 percent in October and was lower than early in the year, meaning that interest rates are likely to remain low in the new year.

While low inflation is seen as transitory, some FOMC members were concerned “that inflation might stay below the objective for longer than they currently expected.”

The material has been provided by InstaForex Company – www.instaforex.com