by Howard Schneider and Lindsay Dunsmuir
WASHINGTON (Reuters) – Most U.S. Federal Reserve (Fed) officials expressed concern in January about the risk of prematurely lowering interest rates, questioning how long the costs of borrowing were expected to remain high, show the “minutes” published Wednesday.
“Participants highlighted the uncertainty linked to the duration during which a strict monetary policy must be maintained” to return to inflation falling within the Fed’s 2% objective, it is written in the account -minutes of the meeting of January 30 and 31.
While “most participants noted the risks of deciding too quickly to ease monetary policy,” only two of the U.S. central bank officials noted the “risks” for the economy of maintaining a stance “for too long.” strict.
“Generally speaking”, Fed officials agreed that they need “more confidence” in falling inflation before considering lowering rates, the ‘minutes’ said, appearing to insist on a cautious approach of the institution, echoing the comments of its president, Jerome Powell, at the end of the January meeting.
“Some participants” cited the risk that progress made against inflation could stagnate if the economy continues to be as strong as it has been to date, the report added.
The Fed decided last month to leave rates unchanged for the fourth consecutive meeting and opened the way to rate cuts when its officials have “greater confidence” that inflation is sustainably approaching the 2% target.
Speaking at a press conference following the Fed’s press release, Jerome Powell made it clear that the hypothesis of a rate cut as early as March was ruled out.
The minutes of the meeting suggest that such a scenario was not envisaged at all.
Data published after the January 30-31 meeting showed a stronger-than-expected labor market and a stronger-than-expected acceleration in inflation in January.
If these data have not caused a shift in the analysis of Fed officials, who still say they expect inflation to continue to decline this year, they have not brought the “confidence” hoped for for lower rates.
(Reporting Howard Schneider; French version Jean Terzian)
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