Federal Reserve policymakers identified inflation as their 'greatest' worry at their last meeting and hinted that more rate hikes might be necessary, according to minutes released tonight.
While agreeing to keep the US federal funds rate at 5.25%, the October 25 meeting of the central bank's federal open market committee (FOMC) was united in fretting about the outlook for prices, the minutes said. However, since the meeting, an array of data have suggested that both economic growth and inflation are easing.
'All members agreed that the risks to achieving the anticipated reduction in inflation remained of greatest concern,' the minutes read.
The FOMC noted marked slowdowns in the housing market and in the car industry, while welcoming sharp falls in oil prices from summer highs. 'Nearly all members expected that the economy would expand close to or a little below its potential growth rate and that inflation would ebb gradually from its elevated levels,' the minutes said.
'Nevertheless, nearly all participants viewed the current rates of core inflation as uncomfortably high and stressed the importance of further moderation,' they added.
The FOMC observed that there would be a heavy flow of data before its next meeting in December, giving it ample scope to judge 'whether any additional firming was needed to address those risks'.
Much of that data already in points to US inflation slowing as energy prices have fallen. The Fed minutes came out before the government's latest report on consumer price inflation tomorrow.
Relatively weak data on US producer inflation and retail sales bolstered prospects yesterday for a 'soft landing' for the world's biggest economy, reviving talk that the Fed's next move might be to cut interest rates.
