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Wednesday, April 8, 2015

FOMC Members Divided over Timing of Increase

The Federal Open Market Committee (FOMC) minutes of the March 17-18 meeting showed that some committee members were divided over when to raise interest rates. Several members believed that economic data warranted a raise in rates at the June meeting, while others believed that declining energy prices and the dollar’s appreciation were reason to delay the first increase until later in the year. A couple of participants suggested that the economic outlook likely would not call for liftoff until 2016.

The Committee noted that labor markets had improved further, though the economy had “moderated somewhat,” a change in language from the last meeting’s minutes which said that the economy was improving at a “solid” pace. A factor in the economy’s moderation was the slowdown in the growth of exports, a byproduct of the strengthening dollar.

The FOMC stated that the increase in the federal funds rate will depend on further improvement in the labor market and confidence that inflation will move back to its 2% medium term objective. The Committee believes current inflation to be artificially low due to weak energy prices.

Committee participants emphasized that monetary policy will remain highly accommodative even after the first increase in rates, noting that their data-dependent approach would not necessarily mandate increases at each subsequent meeting.

Read the FOMC minutes

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