Extracts From the Minutes of the Federal Open Market Committee:
Against the backdrop of their views of the economic outlook, participants discussed whether the available information warranted taking another step to reduce policy accommodation at this meeting. Based on the relatively limited information received since the September FOMC meeting, participants generally agreed that the case for increasing the target range for the federal funds rate had continued to strengthen. Participants saw recent information as indicating that labor market conditions had improved further and considered the firming in inflation and inflation compensation to be positive developments, consistent with continued progress toward the Committee's 2 percent inflation objective.
Most participants expressed a view that it could well become appropriate to raise the target range for the federal funds rate relatively soon, so long as incoming data provided some further evidence of continued progress toward the Committee's objectives. Some participants noted that recent Committee communications were consistent with an increase in the target range for the federal funds rate in the near term or argued that to preserve credibility, such an increase should occur at the next meeting. A few participants advocated an increase at this meeting; they viewed recent economic developments as indicating that labor market conditions were at or close to those consistent with maximum employment and expected that recent progress toward the Committee's inflation objective would continue, even with further gradual steps to remove monetary policy accommodation. In addition, many judged that risks to economic and financial stability could increase over time if the labor market overheated appreciably, or expressed concern that an extended period of low interest rates risked intensifying incentives for investors to reach for yield, potentially leading to a mispricing of risk and misallocation of capital. In contrast, some others judged that allowing the unemployment rate to fall below its longer-run normal level for a time could result in favorable supply-side effects or help hasten the return of inflation to the Committee's 2 percent objective; noted that proximity of the federal funds rate to the effective lower bound places potential constraints on monetary policy; or stressed that global developments could pose risks to U.S. economic activity. More generally, it was emphasized that decisions regarding near-term adjustments of the stance of monetary policy would appropriately remain dependent on the outlook as informed by incoming data, and participants expected that economic conditions would evolve in a manner that would warrant only gradual increases in the federal funds rate.
After assessing the outlook for economic activity, the labor market, and inflation, as well as the risks around that outlook, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent at this meeting. Members generally agreed that the case for an increase in the policy rate had continued to strengthen. But a majority of members judged that the Committee should, for the time being, await some further evidence of progress toward its objectives of maximum employment and 2 percent inflation before increasing the target range for the federal funds rate.