'Many' Fed members favor December rate hike: minutes

'Many' Fed members favor December rate hike: minutes”

Federal Reserve policymakers had a prolonged debate about the prospects of a pickup in inflation and slowing the path of future interest rate rises if it did not, according to the minutes of the USA central bank's last policy meeting on September 19-20 which was released on Wednesday.

Observers widely expect that if the Fed chooses to adopt a third rate hike in 2017, it will do so at its final meeting of the year in December. That view gained further credence in the wake of strong US economic data and Fed officials' comments.

The continuing disagreements among members of the Federal Reserve could leave investors and market watchers guessing about the path of U.S. monetary policy in the waning months of the year. Some see another rate hike as likely.

Economists have been baffled by the circumstances and Fed members have disagreed since 2016 on the near-term threat that prices will rise and that the economy will overheat.

"Low inflation, in itself, is not a problem in an economy that is growing and operating at full employment", George said.

"A few of these participants thought that no further increases in the federal funds rate were called for in the near term", the minutes said.

Fed Chair Janet Yellen has repeatedly acknowledged since the meeting that there is rising uncertainty on the path of inflation, which has been retreating from the Fed's 2 percent target rate over the past few months.

The Fed has its next meeting October 31-Nov.

Raising rates an "unduly slow pace" could cause price pressures to spike and encourage risk-taking by investors, they argued, and delaying too long could force the Fed in the future to jack up rates suddenly, harming the economy. Another group suggested that no further rate increases were called for in the near term.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1 basis point to 2.83 percent, the yield on the 15-year note also slid 1 basis point to 3.11 percent and the yield on short-term 2-year traded flat at 1.95 percent by 03:05GMT. "Many participants expressed concern that the low inflation readings this year might reflect not only transitory factors, but also the influence of developments that could prove more persistent", the minutes read.

"At the moment, the minutes say several members say the outlook is uncertain and another rate hike this year will depend importantly on whether inflation shows signs of strengthening", Rupkey said.

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