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--Some Voters Say Will Be Assessing Infl Trajectory Ahead of Next Hike 
--Several Particip Say Hike Depends on Their Confidence on Infl
--A Few Particip Need To See Data Confirming Infl Moving Higher
     WASHINGTON (MNI) - The following is an excerpt of the Federal Open 
Market Committee minutes describing committee's policy action, 
published Wednesday for the Sept. 19-20 meeting: 
     Some members emphasized that, in considering the timing of further 
adjustments in the federal funds rate, they would be evaluating incoming 
information to assess the likelihood that recent low readings on 
inflation were transitory and that inflation was again on a trajectory 
consistent with achieving the Committees 2 percent objective over the 
medium term. 
     With the medium-term outlook little changed, inflation below 2 
percent, and the neutral rate of interest estimated to be quite low, all 
participants thought it would be appropriate for the Committee to 
maintain the current target range for the federal funds rate at this 
meeting, and nearly all supported again indicating in the postmeeting 
statement that a gradual approach to increasing the federal funds rate 
will likely be warranted. Nevertheless, many participants expressed 
concern that the low inflation readings this year might reflect not only 
transitory factors, but also the influence of developments that could 
prove more persistent, and it was noted that some patience in removing 
policy accommodation while assessing trends in inflation was warranted. 
A few of these participants thought that no further increases in the 
federal funds rate were called for in the near term or that the upward 
trajectory of the federal funds rate might appropriately be quite 
shallow. Some other participants, however, were more worried about 
upside risks to inflation arising from a labor market that had already 
reached full employment and was projected to tighten further. Their 
concerns were heightened by the apparent easing in financial conditions 
that had developed since the Committees policy normalization process 
was initiated in December 2015. These participants cautioned that an 
unduly slow pace in removing policy accommodation could result in an 
overshoot of the Committees inflation objective in the medium term that 
would likely be costly to reverse or could lead to an intensification of 
financial stability risks or to other imbalances that might prove 
difficult to unwind. 
     Consistent with the expectation that a gradual rise in the federal 
funds rate would be appropriate, many participants thought that another 
increase in the target range later this year was likely to be warranted 
if the medium-term outlook remained broadly unchanged. Several others 
noted that, in light of the uncertainty around their outlook for 
inflation, their decision on whether to take such a policy action would 
depend importantly on whether the economic data in coming months 
increased their confidence that inflation was moving up toward the 
Committees objective. A few participants thought that additional 
increases in the federal funds rate should be deferred until incoming 
information confirmed that the low readings on inflation this year were 
not likely to persist and that inflation was clearly on a path toward 
the Committees symmetric 2 percent objective over the medium term. All 
agreed that they would closely monitor and assess incoming data before 
making any further adjustment to the federal funds rate. 
     Based on the available data, PCE price inflation over the 12 months 
ending in August was estimated to be about 1 percent, remaining below 
the Committees longer-run objective. In their review of the recent data 
and the outlook for inflation, participants discussed a number of 
factors that could be contributing to the low readings on consumer 
prices this year and weighed the extent to which those factors might be 
transitory or could prove more persistent. Many participants continued 
to believe that the cyclical pressures associated with a tightening 
labor market or an economy operating above its potential were likely to 
show through to higher inflation over the medium term. In addition, many 
judged that at least part of the softening in inflation this year was 
the result of idiosyncratic or one-time factors, and, thus, their 
effects were likely to fade over time. However, other developments, such 
as the effects of earlier changes to government health-care programs 
that had been holding down health-care costs, might continue to do so 
for some time. Some participants discussed the possibility that secular 
trends, such as the influence of technological innovations on 
competition and business pricing, also might have been muting 
inflationary pressures and could be intensifying. It was noted that 
other advanced economies were also experiencing low inflation, which 
might suggest that common global factors could be contributing to 
persistence of below-target inflation in the United States and abroad. 
Several participants commented on the importance of longer-run inflation 
expectations to the outlook for a return of inflation to 2 percent. A 
number of indicators of inflation expectations, including survey 
statistics and estimates derived from financial market data, were 
generally viewed as indicating that longer-run inflation expectations 
remained reasonably stable, although a few participants saw some of 
these measures as low or slipping. 
     Participants raised a number of important considerations about the 
implications of persistently low inflation for the path of the federal 
funds rate over the medium run. Several expressed concern that the 
persistence of low rates of inflation might imply that the underlying 
trend was running below 2 percent, risking a decline in inflation 
expectations. If so, the appropriate policy path should take into 
account the need to bolster inflation expectations in order to ensure 
that inflation returned to 2 percent and to prevent erosion in the 
credibility of the Committees objective. It was also noted that the 
persistence of low inflation might result in the federal funds rate 
staying uncomfortably close to its effective lower bound. However, a few 
others pointed out the need to consider the lags in the response of 
inflation to tightening resource utilization and, thus, increasing 
upside risks to inflation as the labor market tightened further. 
     On balance, participants continued to forecast that PCE price 
inflation would stabilize around the Committees 2 percent objective 
over the medium term. However, several noted that in preparing their 
projections for this meeting, they had taken on board the likelihood 
that convergence to the Committees symmetric 2 percent inflation 
objective might take somewhat longer than they anticipated earlier. 
Participants generally agreed it would be important to monitor inflation 
developments closely. Several of them noted that interpreting the next 
few inflation reports would likely be complicated by the temporary 
run-up in energy costs and in the prices of other items affected by 
storm-related disruptions and rebuilding. 
--MNI Washington Bureau; tel: +1 202-371-2121; email: