The Federal Reserve noted that cheap oil prices and the stronger dollar may mean that the first hike will come when the core inflation is low. However, members see the decline in inflation as a temporary situation and said they expect inflation to move gradually back toward its target as the job market improves and the impact of cheaper energy dissipates.
Chair Janet Yellen told reporters afterward rates wouldn’t begin to rise for at least two more meetings. The latest minutes showed broad support for Yellen’s assessment of the likely timing of the first interest rate increase since 2006.
"With lower energy prices and the stronger dollar likely to keep inflation below target for some time, it was noted that the Committee might begin normalization at a time when core inflation was near current levels, although in that circumstance participants would want to be reasonably confident that inflation will move back toward 2% over time,” the minutes showed
The Fed did stress that the timing of the first rate rise would depend on incoming economic data. Some members expressed concern that the use of the word “patient” could risk being interpreted by Wall Street as restricting the first rate increase to mid-2015, without allowing for the possibility that new data could trigger an earlier or later move.
Charles Evans, president of the Federal Reserve Bank of Chicago said shortly after the minutes were released that the U.S. might not hit the Fed’s target inflation rate until 2018 and he doesn’t advocate raising interest rates until 2016.
“We should be patient about maintaining the stance of our current policies,” Evans said at an event held at the Federal Reserve Bank of Chicago. “We should be in no hurry to raise interest rates.”
In the latest Federal Open Market Committee (FOMC) minutes, officials agreed that interest rates are unlikely to rise before April, but the exact timing of the increase depends on the health of the economy.