Most Fed officials said Trump policies could boost economy, but it’s ‘too early to know’

Federal Reserve Chairwoman Janet L. Yellen smiles during a news conference Dec. 14 in Washington.
(Alex Brandon / AP)

After the election victories of Donald Trump and his fellow Republicans, most Federal Reserve officials anticipated the economy could grow faster because of new fiscal and economic initiatives, but said it was “too early to know,” according to an account released Wednesday of their latest monetary policy meeting.

The “prospects for more expansionary fiscal policies in coming years” could cause the central bank to raise a key interest rate more quickly than anticipated, Fed policymakers said at the Dec. 13-14 meeting, according to minutes released with the usual three-week delay.

At that meeting, the Federal Open Market Committee nudged up the interest rate for the first time in a year and just the second time in more than a decade. The target range of the rate was increased 0.25 of a percentage point, to a range between 0.5% and 0.75%.

The rate had been kept near zero during and after the Great Recession in an attempt to stimulate the economy.


Reflecting the potential for stronger growth in the wake of the election, Fed policymakers signaled after the December meeting that they would enact three quarter-percentage-point increases this year. In September they had forecast just two 2017 hikes.

Despite sounding more upbeat about the economy, the meeting’s minutes said Fed officials “emphasized their considerable uncertainty about the timing, size and composition of any future fiscal and other economic policy initiatives” by Congress and the White House.

President-elect Trump campaigned on promises to cut taxes, eliminate regulations and boost spending on defense and infrastructure to stimulate economic growth.

There was broad agreement among Fed policymakers that “it was too early to know” what changes were coming and how they might affect the economy.

Fed Chairwoman Janet L. Yellen echoed those concerns in a news conference after the December meeting, saying she and her colleagues “are operating under a cloud of uncertainty at the moment” regarding new fiscal policies.

The meeting’s minutes showed that several Fed policymakers said that “depending on the mix of tax, spending, regulatory and other possible policy changes, economic growth might turn out to be faster or slower than currently anticipated.”

Still, almost all of the policymakers said the “upside risks” to their economic forecasts — the potential for growth to be faster than anticipated — had increased.

Policymakers from the Fed’s regional banks indicated that many of their local business contacts “expressed greater optimism about the economic outlook” and that could “spur stronger investment spending.”

But some businesspeople “were concerned that their businesses might be adversely affected by some of the proposals under discussion” involving federal spending, tax and regulatory policies, the minutes said.

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