Federal Reserve cautious of raising interest rates against backdrop of economic growth

Joe Hall
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The Federal Reserve remains cool on an interest rate hike. (Source: Getty)

The Federal Reserve’s policy committee reaffirmed its cautious approach to raising interest rates after voting in unison against the measure in January.

Minutes from the January meeting reveal that the majority of the committee were wary of hiking rates too soon and hampering growth in the US economy.
However, the group was less unified on its strategy for when it eventually raises interest rates beyond their current 0-0.25 per cent level.
The minutes noted:
Many participants indicated that their assessment of the balance of risks associated with the timing of the beginning of policy normalization had inclined them toward keeping the federal funds rate at its effective lower bound for a longer time.
Debate amongst members focused around when would be the ideal time to adjust rates. A number argued that they would need to see further improvement in labour market conditions and growth in activity before beginning policy normalization.
“Several” members also claimed that a late rise could lead to high inflation while “some” are said rates have already been kept low for a sufficient amount of time.
The Fed argued that falling oil prices could boost consumer spending:
Recent declines in oil prices, which had boosted household purchasing power, were among the factors likely to underpin consumer spending in coming months; other factors cited as supporting household spending included low interest rates, easing credit standards, and continued gains in employment and income.

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