WASHINGTON — Federal Reserve officials believe the economy is “approaching the point” where “policy firming” will be needed—in other words, the point at which it will see a need to raise short-term interest rates.
The Fed’s Federal Open Market Committee released minutes of its July meeting yesterday with its members indicating they are still waiting on more evidence the economy has returned to solid footing before they will move on rates.
“Most judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point,” the released minutes state, adding nearly all of the FOMC committee members said “they would need to see more evidence that economic growth was sufficiently strong.”
Short-term interest rates have been near zero since the financial crisis, and regulators and other analysts have been cautioning credit unions for more than a year to prepare for a rate increase that has yet to materialize. Analysts continue to say they believe the Fed will move before year-end to raise short-term rates.
“Many members thought that labor market underutilization would be largely eliminated in the near term if economic activity evolved as they expected,” the minutes said.
The Federal Reserve has said it anticipates inflation will increase in the months ahead. Prices, excluding energy and food, are up 1.8% this year over 2014.
The minutes show that most committee members, including Chairwoman Janet Yellen, say they do not see a need to wait for prices to continue to increase before they would favor raising rates.