NAFCU’s Long: FOMC divided on rate hike

The minutes of the Federal Open Market Committee’s July meeting show divisions within the committee on how plans to raise interest rates should be tied to data, NAFCU Chief Economist and Director of Research Curt Long said Wednesday.

“The FOMC minutes continue to reflect divisions within the committee,” Long said. “The constant refrain of ‘data dependency’ from Fed officials loses its meaning when there is no consensus on what the data means, much less which policy course is warranted.

“Nevertheless, it seems safe to say that many of the committee’s fears were alleviated with the strong June jobs report and by Brexit’s lack of impact on financial markets,” Long continued. “With inflationary pressures yet to emerge, the Fed seems happy to play the waiting game as far as rate normalization is concerned. As a result, we anticipate no rate hike until December or later.”

Long noted that some FOMC members believe that allowing labor market conditions to tighten too much could lead to a build-up of inflationary pressure, forcing the Fed to increase interest rates rapidly. Others believe inflation is still too far below the Fed’s 2 percent goal and that the committee should delay a rate hike until they are more confident about inflation’s progress.

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