Federal Reserve officials were in no rush to change interest rates as of their last meeting, even if the economy continued to strengthen, and some were worried about persistently low inflation, minutes from their April 30 to May 1 policy meeting show.
Inflation eased to 1.6 percent annually in March, well below the Fed’s goal for 2 percent price increases, according to a report released April 29. It has not sustainably reached the target since the central bank formally adopted it in 2012, and has been languishing below the dividing line for much of the past quarter-century.
“In light of recent, softer inflation readings, some viewed the downside risks to inflation as having increased,” according to the minutes of the meeting, which were released after a typical three-week delay.
That is contributing to the Fed’s wait-and-see approach to changing interest rates.
“Participants noted that even if global economic and financial conditions continued to improve, a patient approach would likely remain warranted, especially in an environment of continued moderate economic growth and muted inflation pressures,” the minutes said.
Soft price readings are a potential problem for the Fed, which aims for slow, steady increases. Gradual inflation allows wages to rise and offers headroom to guard against outright price decreases when the economy weakens. Officials also see hitting 2 percent in a symmetric way — so that they’re above the target as often as they are below it — as important to their credibility.
The Fed continued to attribute some of the inflation trends to temporary factors that could soon moderate.
“At least part of the recent softness in inflation could be attributed to idiosyncratic factors that seemed likely to have only transitory effects on inflation.” Still, “several” participants said that if inflation did not increase in coming quarters, there was a risk that inflation expectations could dip lower. That could make it even harder to get price increases back to the 2 percent target.
Fed policymakers left rates unchanged at their last meeting and renewed their pledge that they would be patient before making additional rate increases. The central bank lifted rates nine times between the end of 2015 and the end of last year, with four of the increases coming under Chairman Jerome H. Powell’s watch.
Those moves have drawn criticism from President Trump, who has called the Fed a threat to the United States economy and a drag on growth and has urged it to start lowering rates.
Mr. Powell, whom Mr. Trump chose to lead the central bank, has repeatedly highlighted that the Fed is independent of the White House and said that it does not allow politics to influence its decisions.
At the time of the Fed meeting, markets were anticipating a rate cut later this year, convinced that soft inflation would kick officials into action. Mr. Powell did not humor that view during his postmeeting news conference, instead emphasizing that some or all of the recent lag in price increases could be transitory.
The minutes also show little appetite for a rate cut. In fact, while most committee members favored continued patience, “a few participants noted that if the economy evolved as they expected, the committee would likely need to firm the stance of monetary policy to sustain the economic expansion and keep inflation at levels consistent with the committee’s objective.”