Fed split on inflation and interest rates, Latest Business News - The New Paper

Fed split on inflation and interest rates

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WASHINGTON: US Federal Reserve policymakers were increasingly split on the outlook for inflation and how it might affect the future pace of interest rate rises, according to the minutes of the Fed's last policy meeting on June 13-14 released yesterday.

The details of the meeting, at which the US central bank voted to raise interest rates, also showed that several officials wanted to announce a start to the process of reducing the Fed's large portfolio of Treasury bonds and mortgage-backed securities by the end of August, but others wanted to wait until later in the year.

"Most participants viewed the recent softness in this price data as largely reflecting idiosyncratic factors... However, several participants expressed concern that progress... might have slowed and that the recent softness in inflation might persist," the Fed said in the minutes.

The committee questioned why financial conditions had not tightened despite recent rate rises and a few said equity prices were elevated.

Last month's 8-1 vote to lift the benchmark interest rate another quarter percentage point, its second this year, signalled the Fed's confidence in a growing US economy and the eventual inflationary effects of low unemployment.

At the time, Fed chairman Janet Yellen described a recent decline in inflation as temporary. - REUTERS

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