Some Fed policymakers believe economy may be ready for another interest rate hike, minutes show

Shown are the headquarters of the Federal Reserve in Washington, D.C.
(Andrew Harnik / Associated Press)

Some Federal Reserve policymakers said at their most recent meeting that the economy appeared ready for another small increase in a key interest rate, according to an account released Wednesday.

But several other officials said the Fed should wait before nudging up the rate until incoming data “provided a greater level of confidence that economic growth was strong enough to withstand a possible downward shock to demand,” said the minutes of the central bank’s July meeting.

Policymakers voted, 9-1, at the meeting to hold the benchmark federal funds rate steady at between 0.25% and 0.5%.

But the minutes indicated that a rate hike will be on the table at the Fed’s next monetary policy gathering Sept. 20-21.

Esther George, president of the Federal Reserve Bank of Kansas City, cast the only vote against holding the rate steady in July. She believed a 0.25-percentage-point hike “was appropriate” because of “solid employment growth,” continued economic growth and signs that inflation was trending toward the Fed’s annual 2% target, according to the statement issued after the meeting.


But the minutes showed that she wasn’t the only member of the policymaking Federal Open Market Committee who favored a rate hike then or in the coming weeks. The minutes said “some” Fed policymakers disagreed with waiting for more economic data.

“Given their economic outlook, they judged that another increase in the federal funds rate was or would soon be warranted, with a couple of them advocating an increase at this meeting,” according to the minutes.

Fed officials nudged the rate up a quarter of a percentage point in December after holding it near zero for seven years in an attempt to stimulate the economy during and after the Great Recession.

The Fed appeared to be nearing another rate hike in June, but held off amid concern about a slowdown in job growth and the possible impact on labor markets of the then-pending British vote on whether to leave the European Union.

By the July meeting, those fears had eased and upbeat language in the Fed’s policy statement appeared to open the door to a rate hike as early as September.

Since that meeting, the Labor Department reported another strong month of job growth and solid wage gains.

William Dudley, president of the Federal Reserve Bank and the vice chairman of the Fed’s monetary policy committee, said on Tuesday that a small hike was possible next month.

“We are edging closer toward the point in time when it will be appropriate to raise rates further,” he told the Fox Business Network.

Follow @JimPuzzanghera on Twitter