Fed Minutes Show Rate Rise Still on Table
WASHINGTON -- Federal Reserve officials agreed at last month's policy meeting that more interest-rate increases might be needed to combat inflation, but given increased uncertainties about the economy, they opted not to cite higher rates as their only alternative.</br></br>"[I]n light of the increased uncertainty about the outlook for both growth and inflation, the [Federal Open Market Committee] also agreed that the statement should no longer cite only the possibility of further firming," according to a summary of the March 20-21 meeting, released yesterday with the usual three-week lag.</br></br>Downside economic-growth risks "had increased in the weeks since the January [FOMC] meeting," according to the minutes, "and the latest information cast some doubt on whether core inflation was on the expected downward path."</br></br>The Fed has held the federal-funds interest rate steady at 5.25% since June. At last month's meeting, it dropped a longstanding reference to the possibility of higher interest rates, saying instead that "future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth."</br></br>Investors' initial reaction that the wording meant the Fed might cut rates was quickly reversed a week after the Fed meeting when Fed Chairman Ben Bernanke said, "I do want to emphasize that we have not shifted away from an inflation bias."