WASHINGTON • Central bankers in the United States are sharply divided over whether to increase interest rates again this year amid persistently weak inflation, but many still favour a hike, meeting minutes released this week show.
The continuing disagreements among members of the Federal Reserve could leave investors and market watchers guessing about the path of US monetary policy in the waning months of the year.
Policymakers also said the economic effects of hurricanes Harvey, Irma and Maria, which tore a path of destruction across US territories in August and September, were likely to be only temporary, according to a record released on Wednesday of the Fed's most recent meeting last month.
The Federal Open Market Committee (FOMC), the Fed panel which sets monetary policy for the US, has twice raised interest rates this year despite the fact that inflation has remained tame in the face of steady job creation and falling unemployment.
Economists have been baffled by the circumstances and Fed members have disagreed since last year on the near-term threat that prices will rise and that the economy will overheat.
The minutes, which recount discussions among FOMC members at their most recent meeting on Sept 19 and 20, show such disagreements were no closer to being resolved despite the passage of time.
At that meeting, the Fed left interest rates untouched at their current range of 1 per cent to 1.25 per cent and forecast one final rate hike this year as well as three more next year.
Observers widely expect that if the Fed chooses to adopt a third rate hike this year, it will do so in December, the central bank's final meeting of the year.
"Many participants thought that another increase in the target range later this year was likely to be warranted," the minutes say.
Those concerned about the looming danger of inflation believed raising rates at "an unduly slow pace" could cause price pressures to overshoot the central bank's 2 per cent target.
They are also worried that too much easy money could encourage risk taking by investors, threatening financial stability, and that delaying too long could force the Fed in the future to jack up rates suddenly, harming the economy.
However, the account of the meeting made clear an important faction of policymakers still see no clear reason to act immediately.
Many participants, the minutes say, believed low inflation could be a longer-term trend. "And it was noted that some patience in removing policy accommodation while assessing trends in inflation was warranted."
Among this group, a few believed "no further increases" were called for, adding that "the upward trajectory of the federal funds rate might appropriately be quite shallow".