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--Several Officials Want to Feel More Confident on Infl Before Hike
--Some Other Officials Worried About Upside Risk to Infl
--Hurricanes to Distort Data for Next Few Months; No Med-Term Impact
By Jean Yung
     WASHINGTON (MNI) - Many Federal Reserve policymakers in their 
September meeting worried over whether recent low inflation readings 
this year were transitory and some said they wanted to feel more 
confident that inflation was moving higher before raising interest rates 
again. Yet at the same time, others expressed concern over upside risks 
for inflation given the tightness of the labor market, minutes of the 
meeting showed Wednesday. 
     The account highlights the range of opinions on the Federal Open 
Market Committee after their preferred measure of inflation, the core 
personal consumption expenditures price index, decelerated from a 1.9% 
annual pace earlier this year to just 1.4% in August. 
     "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," the account of the Sept. 19-20 
meeting said. 
     But, "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," the minutes said. 
     "A few participants," which includes nonvoters on the FOMC, 
"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." 
     The Fed kept its key policy rate steady to a target range of 1.00% 
to 1.25% at the September meeting while launching its planned balance 
sheet reduction program. The minutes showed that all officials though it 
was appropriate to hold rates steady and "nearly all" supported saying 
in their post-meeting statement that "a gradual approach to increasing 
the federal funds rate will likely be warranted."  
     Still, "many participants" expressed concern that the low inflation 
readings might reflect not only transitory factors, "but also the 
influence of developments that could prove more persistent," and 
concluded that hitting the Fed's 2% target "might take somewhat longer 
than they anticipated earlier." 
     "It was noted that some patience in removing policy accommodation 
while assessing trends in inflation was warranted," the minutes said, 
adding that a few officials thought no more hikes were called for in the 
near term or that the upward trajectory for the fed funds rate "might 
appropriately be quite shallow." 
     Among the voters, some emphasized that 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 Committee's 2 percent objective 
over the medium term." 
     Officials cited the tight labor market as supporting inflation over 
the medium term. Most officials said they expected wage increases to 
pick up as the labor market strengthened further, and a couple of them 
"cautioned that a broader acceleration in wages may already have 
begun," the minutes said. 
     "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," the minutes said. 
     Judging the economy more broadly, Fed officials noted that the 
expansion was evolving mostly as expected and even the unusually 
destructive hurricane season won't have any material impact over the 
medium term. 
     While higher prices for gasoline and other items were likely to 
boost inflation temporarily, and storm-related disruptions could hold 
down GDP growth in the third quarter, officials saw little change in 
their outlook for growth and the labor market.           
     Stock prices were higher and long-term interest rates and the 
exchange rate of the dollar were declining between the July and 
September FOMC meetings, officials noted, creating accommodative 
financial conditions. That drew the attention of a couple officials, who 
said such easy conditions over time could pose risks to financial 
stability. 
                                                 
--MNI Washington Bureau; tel: +1 202-371-2121; email: 
jean.yung@marketnews.com 
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