Gradual hikes needed amid very strong economy though. Meeting minutes from June 2018 FOMC meeting
- price moves support outlook for 2% inflation
- some officials: running economy too hot risks economic downturn
- Saw fiscal policy supporting economic growth
- a few fed officials saw US fiscal policy as upside risk
- broad support for gradual rate hikes
- many business contacts concerned by risks from a trade war
- Many saw downside risks from emerging markets, Europe
- important to watch yield curve slope
- Fed policymakers discussed flattening of yield curve
- Fed staff gave a presentation on recession risks based on spread between current Fed funds ratea and expected rate several quarters ahead
- Trade worries have scaled back capital spending for some
- policymakers voted on statement and said forward guidance language was no longer appropriate in light of economies strength and expected rate path
- A few Fed policymakers said Fed might want to discuss before long how to conduct monetary policy best when reserve balances fall appreciably
- many policymakers said gradual hikes could take Fed funds rate above the neutral level sometime next year
- a few Fed policymakers said inflation temporarily about 2% could help anchor inflationary expectations
- almost all policymakers batching rate hike: 1 policymaker said postponing hike could help push inflation expectations higher
As the Fed continues its path of gradual rate hikes, the Fed seems torn between the good and the bad. Whether it is two camps is not really sure. In a way, you can be both happy and concerned at the same time especially given the uncertainty from inflation, trade impact and also as the Fed gets closer to what is perceived as the neutral level of rates (which they said should be reached next year).
The minutes are suggesting the Fed is on a path toward neutrality. They don't seem worried about falling off that path, but are also cognizant that all good things do come to an end.
