But the minutes indicate most central bank officials do not believe they need to wait that long. The global turmoil did not result in a significant change in the Fed’s assessment of the economy, but the minutes show officials wanted confirmation that their forecast is correct.
“Although the time for policy normalization might be near, it would be appropriate to wait for information, including evidence of further improvement in the labor market, confirming that the outlook for economic growth had not deteriorated significantly and that inflation was still on a path to return to 2 percent over the medium term,” the minutes state.
The documents show officials were generally upbeat about the the health of the U.S. recovery, which has boasted declining unemployment rate and steady economic growth. Though a stronger dollar is weighing on exports and lower prices for oil and other commodities may be holding back inflation, officials judged those factors to be temporary.
“Many participants judged that the effects of these developments on domestic economic activity were likely to be small,” the minutes state.
But not everyone agrees. In an op-ed in The Washington post, Harvard economist and former Treasury Secretary Lawrence Summers that the global economy is in the most danger since the financial crisis in 2008. The International Monetary Fund earlier this week lowered its forecast for world growth for the third time this year.
“Policymakers badly underestimate the risks of both a return to recession in the West and of a period where global growth is unacceptably slow, a global growth recession,” Summers wrote. “If a recession were to occur, monetary policymakers would lack the tools to respond.”
During the depths of the recession, the Fed slashed its target interest rate to zero, part of an arsenal of emergency measures the central bank unleashed to avert another Great Depression. Since then, the Fed has kept its target rate unchanged and pumped trillions of dollars into the economy in hopes of spurring a faster recovery.
But now the Fed is debating when and how to begin pulling back its support. Though most officials believe the process should start this year -- with a quarter-percentage-point increase in the central bank’s target rate -- some are arguing for a delay: America may not be immune to the global malaise, which weighed on domestic job growth last month. And inflation inflation remains well below the Fed’s goal of 2 percent.
In a speech Thursday in Minnesota, Minneapolis Fed President Narayana Kocherlakota said the Fed should be stimulating the economy even more.
“There is room for more improvement—but we will only achieve those gains if we make the right monetary policy choices,” he said.
Still, all but four of the Fed’s 17 top officials believe the central bank should hike its target rate this year. Wall Street seemed to cheer the upbeat tone of the minutes of September’s meeting, with the major indexes rallying out of negative territory shortly after they were released.