Federal Reserve Predicts Greater Economic Risks
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WASHINGTON — U.S. Federal Reserve officials last month saw greater downside economic risks to the economy, citing a housing sector that weighed “heavily”on activity as well as weaker business investment, according to the minutes of the December 12 Federal Open Market Committee meeting released yesterday.
“Several members judged that the subdued tone of some incoming indicators meant that the downside risks to economic growth in the near term had increased a little and become a bit more broadly based than previously thought,” the minutes stated, suggesting that officials are growing more balanced in their economic and inflation assessment.
Still, officials agreed last month that inflation remained the dominant concern and that more policy tightening was possible.
However, in a departure from previous statements and a sign of some disagreement within the Fed, one member wanted the Fed to leave open the possibility of either a rate cut or a rate increase, depending on the outlook for growth and inflation, the minutes showed.
“It was a little more dovish (than the October minutes), which made sense given the data they’ve been looking at,” an economist at Lehman Brothers, Drew Matus, said. He thinks one official wanting a neutral directive is “more likely the start of a trend than one lone wolf.”
The Fed last month held the federal funds rate unchanged at 5.25% for a fourth straight meeting, though it maintained a bias toward higher rates should inflation persist.
Richmond Fed President Jeffrey Lacker dissented in favor of higher rates as he did in the previous three decisions.