- The Federal Open Market Committee is still open to a rate hike this year.
- Minutes out Wednesday revealed officials see slower growth but expect consumer spending to improve in the coming months.
- Officials most recently voted to increase the benchmark interest rate by a quarter percentage point, bringing it to a target range between 2.25% and 2.5% at the end of 2018.
Federal Reserve officials expect some aspects of the economy to improve in the coming months and could still increase interest rates later in the year, minutes from its latest meeting revealed Wednesday.
“Some participants indicated that if the economy evolved as they currently expected, with economic growth above its longer-run trend rate, they would likely judge it appropriate to raise the target range for the federal funds rate modestly later this year,” the minutes said.
At the conclusion of its March meeting, the Federal Open Market Committee signaled no additional hikes this year and penciled in just one for 2020. Officials cited a series of strains, including the fading effects of tax cuts passed in 2017, ongoing trade tensions, and slowing activity in Europe and China.
Some market watchers have seen an increasing possibility of a rate cut in recent weeks, while officials see an adjustment in either direction as possible.
According to the minutes, the Fed acknowledged slowing growth but also noted expectations for consumption to improve in the coming months. Several measures of consumer spending, which accounts for more than two-thirds of economic activity, came in surprisingly soft in the first quarter.
“The minutes of the March meeting, when the FOMC formally abandoned its prior expectation of two rate hikes this year, are a bit less dovish than might have been expected,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “They are happy to be seen as ‘patient’ for now, but they are cognizant of upside risks to both growth and inflation.”
The 12-member FOMC most recently voted to increase its benchmark interest rate by a quarter percentage point, bringing it to a target range between 2.25% and 2.5% at the end of 2018.