» Subscribe Today!
More of what you want to know.
The Daily News
X

Forgot your password?
Skip Navigation LinksHome >
VOL. 132 | NO. 203 | Thursday, October 12, 2017

Fed Debated Mystery of Persistently Low Inflation

By MARTIN CRUTSINGER, AP Economics Writer

Print | Front Page | Email this story | Comments ()

WASHINGTON (AP) – Federal Reserve officials at their September meeting struggled to come to terms with persistently low inflation. But in the end, they decided that they should continue to signal the possibility of a third rate hike this year.

The minutes of their discussions released Wednesday show that a group of Fed officials worried that low unemployment could result in a quick rebound in inflation and that a third rate hike was needed. Another group believed that no further increases were called for in the near term.

Economists are split over whether the Fed will raise rates again in December. Some see another rate hike as likely. Others think that if inflation does not start to climb, the Fed will remain on hold.

The Fed has its next meeting Oct. 31-Nov. 1 before a final meeting in mid-December.

Fed Chair Janet Yellen and other Fed officials earlier in the year pointed to transitory factors such as falling prices for mobile cell phone plans as a reason inflation was moving farther from the Fed's 2 percent inflation goal. But with the low inflation persisting, she and other officials have recently acknowledged that perhaps something more long-lasting may be happening.

The minutes of the Fed's September meeting revealed that the mystery over inflation was a key talking point during the two days of discussions.

"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 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.

However, another group of Fed officials continued to express worries that inflation could rebound very quickly, given low unemployment. The jobless rate in September fell to a 16-year low of 4.2 percent after having been at 4.4 percent at the time of the Fed's discussions.

The group worried that low unemployment might spark higher wage demands. Rapidly rising inflation pressures could then force the Fed to begin hiking rates more quickly and run the risk of pushing the country into a recession.

This group also worried that the low Fed rates could also result in bubbles in asset prices such as stocks, leading to financial instability.

The Fed's key rate is currently at a still low level of 1 percent to 1.25 percent after two quarter-point rate hikes this year in March and June.

Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Sign-Up For Our Free Email Edition
Get the news first with our daily email


 
Blog News, Training & Events
RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 102 224 17,767
MORTGAGES 127 277 20,703
FORECLOSURE NOTICES 0 0 0
BUILDING PERMITS 176 510 36,326
BANKRUPTCIES 54 146 11,828
BUSINESS LICENSES 21 80 5,640
UTILITY CONNECTIONS 27 147 12,181
MARRIAGE LICENSES 11 60 4,417

Weekly Edition

Issues | About

The Memphis News: Business, politics, and the public interest.