WASHINGTON (AP) 鈥� Federal Reserve officials regarded the U.S. economy鈥檚 outlook as particularly uncertain last month, according to minutes released Wednesday, and said they would 鈥減roceed carefully鈥� in deciding whether to further raise their benchmark interest rate.
Such cautious views are generally seen as evidence that the Fed isn't necessarily inclined to raise rates in the near future. Their next meeting is in three weeks.
Economic data from the past several months 鈥済enerally suggested that inflation was slowing,鈥� the minutes of the Sept. 19-20 meeting said. The policymakers added that further evidence of declining inflation was needed to be sure it would slow to the Fed鈥檚 2% target.
Several of the 19 policymakers said that with the Fed鈥檚 key rate 鈥渓ikely at or near its peak, the focus鈥� of their policy decisions should 鈥渟hift from how high to raise the policy rate to how long鈥� to keep it at economically restrictive levels.
And the officials generally acknowledged that the risks to Fed鈥檚 policies were becoming more balanced between raising rates too high and hurting the economy and not raising them enough to curb inflation. For most of the past two years, the Fed had said the risks were heavily tilted toward not raising rates enough.
Given the uncertainty surrounding the economy, the Fed left its key short-term rate unchanged at 5.4% , the highest level in 22 years, after 11 rates hikes over the previous 18 months.
The officials noted several sources of uncertainty. They include the strike by the United Auto Workers union against Detroit automakers; higher oil and gas prices; concern that an economically weaker China would slow growth in the United States; and the threat of an extended U.S. government shutdown. Since the September meeting, two of those threats have abated: Oil and gas prices have dropped. And a government shutdown has been avoided, at least until mid-November.
The minutes arrive in a week in which several Fed officials have suggested that a jump in longer-term bond rates could help cool the economy and inflation in the coming months. As a result, the Fed may be able to avoid a rate hike at its next two-day meeting, which ends Nov. 1. Futures markets prices show few investors expect a rate increase at that meeting or at the next one in December.
Overall inflation, as measured year over year, has dropped from a peak of 9.1% in June 2022 to 3.7% in August. The latest data on consumer price changes will be released Thursday, and economists expect it to show that annual inflation ticked down in September to 3.6%.
On Wednesday, Christopher Waller, an influential member of the Fed鈥檚 governing board, suggested that higher long-term bond rates, by making many loans costlier for consumers and businesses, are doing 鈥渟ome of the work for us鈥� in fighting inflation. Waller also underscored the Fed鈥檚 cautious approach in his remarks in Park City, Utah, during a question-and-answer session.
鈥淲e鈥檙e in this position where we can kind of watch and see what happens,鈥� Waller said.
But he also expressed more optimism about inflation than he has in the past, noting that the past three months of price changes, according to the Fed鈥檚 preferred measure, have been 鈥渧ery good.鈥�
鈥淚f this continues," Waller said, 鈥渨e鈥檙e pretty much back to our target.鈥�
At their meeting last month, Fed officials issued an optimistic set of projections that envisioned inflation falling over the next two years, with only a small increase in unemployment and modest economic growth. The forecast raised the prospect of a 鈥渟oft landing鈥� in which inflation would slow to the Fed鈥檚 2% target without causing a deep recession.
Yet the projections also showed that the policymakers expected to keep their benchmark rate elevated well into 2024 to keep the economy from sending inflation up again. They showed that Fed officials expected to cut rates only twice next year. Previously, they had penciled in four rate cuts.
鈥淲e鈥檙e fairly close, we think, to where we need to get,鈥� Chair Jerome Powell said at a news conference after the September meeting. 鈥淎 soft landing is a primary objective. ... That鈥檚 what we鈥檝e been trying to achieve.鈥�
Christopher Rugaber, The Associated Press
