Several members of the Federal Reserve worried at their most recent meeting that the central bank risks losing credibility if it fails to raise interest rates in the coming months, an account of the meeting published Wednesday shows.
Minutes from the Fed’s Sept. 20-21 meeting said that “several” participants raised the concern that the Fed “risked eroding its credibility” if it continued to delay rate hikes, given that many of the criteria they have set out in the past for raising rates have been met.
That meeting resulted in a decision not to raise rates, although the Fed’s official statement acknowledged that the case for raising short-term interest rates and tightening monetary policy had “strengthened.” Following the meeting, Chairwoman Janet Yellen explained to the press that the Fed was delaying tighter money in order to give the economy “room to run” and bring discouraged workers off the sidelines and into jobs.
Three members of the committee dissented from the decision not to raise rates.
A “few” participants at the meeting worried that delaying further rate hikes could risk a recession, based on past episodes in which the Fed held its target rate constant even as unemployment dipped below what officials saw as a healthy level.
Whether to raise rates at upcoming meetings appears to be a 50-50 proposition for the Fed. The minutes released Wednesday indicate that some of the members who voted to keep rates below 0.5 percent thought that doing so was a “close call,” and some are prepared to raise rates “relatively soon” if the economy keeps growing.
