On the Record, Fed Takes Neutral Rate Stance After Talk of Increase

Federal Reserve Board officials shifted to an officially neutral stance on the direction of interest rates at a policymaking session Dec. 16, according to minutes of the meeting released Thursday.

Most of the members of the Federal Open Market Committee continue to believe the U.S. economy is so tightly wound that the next Fed move likely would be a rate increase. But with the greater uncertainty caused by Asia’s economic turmoil, they chose to shift to an officially neutral stance after months of leaning in the direction of higher rates, the minutes reported.

One committee member, J. Alfred Broaddus, president of the Richmond Federal Reserve Bank, dissented, saying he preferred an immediate small increase in rates.

“Mr. Broaddus dissented because he continued to believe that a modest tightening of policy would be prudent in light of the apparent persisting strength in aggregate demand for goods and services,” the minutes said.

Officials at the meeting continued to express surprise that inflation was not only not increasing, given the nation’s tight labor markets, but was still falling.