FOMC Excerpt: Another Rate Hike Needed 'Fairly Soon'>

     WASHINGTON (MNI) - The following is an excerpt from the Federal 

Open Market Committee minutes of the November 7 - 8 meeting, published 

Thursday: 

     "In their discussion of monetary policy, participants agreed that 

it would be appropriate to maintain the current target range for the 

federal funds rate at this meeting. Participants generally judged that 

the economy had been evolving about as they had anticipated, with 

economic activity rising at a strong rate, labor market conditions 

continuing to strengthen, and inflation running at or near the 

Committees longer-run objective. Almost all participants reaffirmed the 

view that further gradual increases in the target range for the federal 

funds rate would likely be consistent with sustaining the Committees 

objectives of maximum employment and price stability. 

     Consistent with their judgment that a gradual approach to policy 

normalization remained appropriate, almost all participants expressed 

the view that another increase in the target range for the federal funds 

rate was likely to be warranted fairly soon if incoming information on 

the labor market and inflation was in line with or stronger than their 

current expectations. However, a few participants, while viewing 

further gradual increases in the target range of the federal funds rate 

as likely to be appropriate, expressed uncertainty about the timing of 

such increases. A couple of participants noted that the federal funds 

rate might currently be near its neutral level and that further 

increases in the federal funds rate could unduly slow the expansion of 

economic activity and put downward pressure on inflation and inflation 

expectations. 

     Participants emphasized that the Committees approach to 

setting the stance of policy should be importantly guided by incoming 

data and their implications for the economic outlook. They noted that 

their expectations for the path of the federal funds rate were based on 

their current assessment of the economic outlook. Monetary policy was 

not on a preset course; if incoming information prompted meaningful 

reassessments of the economic outlook and attendant risks, either to 

the upside or the downside, their policy outlook would change. Various 

factors such as the recent tightening in financial conditions, risks in 

the global outlook, and some signs of slowing in interest-sensitive 

sectors of the economy on the one hand, and further indicators of 

tightness in labor markets and possible inflationary pressures, on the 

other hand, were noted in this context. Participants also commented on 

how the Committees communications in its postmeeting statement might 

need to be revised at coming meetings, particularly the language 

referring to the Committees expectations for further gradual 

increases in the target range for the federal funds rate. Many 

participants indicated that it might be appropriate at some upcoming 

meetings to begin to transition to statement language that placed 

greater emphasis on the evaluation of incoming data in assessing the 

economic and policy outlook; such a change would help to convey the 

Committees flexible approach in responding to changing economic 

circumstances." 

     ** MNI Washington Bureau: (202)371-2121 ** 

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