U.S. Federal Reserve policy-makers noted “a discernable upcreep” in measures of inflation recently, raising worry that risks from accelerating prices were growing, minutes from their May 3 meeting showed.
“Core measures of price inflation had moved up over recent quarters and particularly so over the last few months,” said the minutes from the Federal Open Market Committee meeting, which were issued Tuesday.
“A discernable upcreep was apparent in survey measures of short- and, to a limited extent, long-term inflation expectations over recent months,” the minutes said. Some members saw both the risks of inflation increasing and of growth slowing but the committee agreed overall that the risks were roughly equally balanced.
The minutes left no doubt that the Fed intends to keep raising borrowing costs, specifying that “the current level of short-term rates remained too low to be consistent with sustainable growth and stable prices in the long run.”
At the May 3 meeting, FOMC members raised the trend-setting federal funds rate for an eighth straight time since last June by one quarter percentage point to 3 percent.
There were evidently growing doubts among the policy-makers about how to plot the future course of rate rises and about whether they were signaling their intentions in a way that was useful for financial markets.
“For many, heightened economic uncertainty in the current environment implied greater uncertainty about the range of possible policy outcomes and placed a premium on flexibility in setting policy at upcoming meetings,” the minutes said.
Some felt increased uncertainty meant they should drop any forward-looking language from the statement they issue after FOMC gatherings, “if not at this meeting, then fairly soon,” but they compromised.
All agreed to retain forward-looking language and felt that saying they would move at a “measured” pace “would not stand in the way of either a pause or a step-up in policy firming depending on events.”
A considerable portion of the May 3 minutes dealt with energy prices and with the shadow that costlier fuel was casting over the nation’s economic prospects.
“Declines in energy prices in recent weeks were viewed as welcome, but participants noted that far-dated futures prices for oil remained quite elevated and that persistently high energy prices could trigger a range of deleterious effects on the economy,” the minutes said. Among other impacts, higher fuel costs were taking a toll on consumer and business confidence and “might be beginning to crimp corporate profits,” the minutes said.
