If the Federal Reserve chief this week signaled an approaching end to the central bank's recent spate of interest rate hikes — as many investors believed — he's got a lot of convincing to do among his fellow policymakers.
That was the takeaway from the minutes released Thursday of the Federal Open Market Committee’s most recent meeting on Nov. 7-8.
"Almost all" the participants in the meeting "reaffirmed the view that further gradual increases" in the benchmark federal funds rate probably would be consistent with hitting the central bank's economic targets, the minutes said.
Also, "almost all" of the 17 meeting participants — only nine of whom can cast votes on interest rates this year — indicated another small increase "was likely to be warranted fairly soon" as long as incoming economic data wasn't disappointing.
Fed officials are widely expected to nudge up the rate by a quarter of a percentage point to a target range between 2.25% and 2.5% when they meet later this month. And nothing from the meeting minutes indicate a change in those plans.
The minutes were released just one day after Fed Chief Jerome H. Powell, in a speech before the Economic Club of New York, said that the federal funds rate was "just below" its so called neutral range. That is the level at which the rate isn't speeding up or slowing down the economy and presumably where the Fed would hold it for a while.
In an interview in early October, Powell had said the rate was a "long way" from neutral. So investors interpreted his remarks on Wednesday as an indication that the central bank’s campaign to raise interest rates to more normal historical levels might come to an end sooner than expected.
The Dow closed up more than 600 points on Wednesday, largely due to Powell’s speech, which followed a barrage of public criticism by President Trump of the independent Fed and Powell, his hand-picked chairman, over the rise in interest rates.
Trump has said that the slowly rising interest rate, which lenders use to set rates for credit cards, home equity lines of credit and auto and business loans, is hurting the U.S. economy.
But Powell spoke positively about the state of the economy in his Wednesday speech and it was unclear if he really was signalling that the hikes soon would be coming to an end.
Some analysts noted that the Fed's most recent estimate of the neutral range for the interest rate is between 2.5% and 3.5%. That meant that being close to the range isn't the same as being close to the actual neutral rate, which still could be as many as five quarter-point hikes away.
Each Fed policymaker has a personal view of the neutral rate, and the minutes from the Nov. 7-8 meeting don’t specify where each stands+, since they are not individually identified.
Only "a couple" of the officials said at the November meeting that the rate "might currently be near its neutral level," the minutes said. "A few" of the officials, while saying that further small rate hikes were likely, "expressed uncertainty about the timing of such increases."
In their last quarterly forecast, in September, Fed officials indicated they expected one more rate hike this year and three in 2019. That would bring the rate's target to between 3% and 3.25% — still within the neutral range.
But since then, financial markets have turned volatile and long-term interest rates have risen.
At the November meeting, Fed officials noted that those developments had meant financial conditions had tightened. Despite that, "a number" of the officials "judged that financial conditions remained accommodative relative to historical norms," according to the minutes.
Fed policymakers were generally upbeat in their overall assessment of the economy, although they did raise concerns about slowing business investment and trade tensions between the U.S. and other nations.
The Dow and S&P 500 ended Thursday down a fraction of a percent, gaining some momentum after the release of the Fed minutes and recovering from steeper losses in morning trading.