Fed Ready to Pause on Interest Rate Increases

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The Fed at its December meeting raised its benchmark rate into a range between 2.25 and 2.5 percent. It was the fifth consecutive quarterly increase. Mr. Powell said the rate now stood near the lower end of the range that the Fed regards as neutral territory — the range in which the central bank is neither encouraging nor discouraging borrowing and economic growth.

At a news conference after the December meeting, Mr. Powell emphasized that economic growth remained strong, and that the Fed expected to continue raising rates in 2019. Investors registered their disapproval by driving down asset prices, exacerbating a market slump.

Since then, Mr. Powell and other Fed officials have sought to deliver a more nuanced message, emphasizing that they are paying attention to the concerns of investors, and that the absence of inflationary pressure means the Fed can afford to postpone judgment.

The account of the December meeting doubled down on that message.

The Fed, according to its minutes, said that “participants expressed that recent developments, including the volatility in financial markets and the increased concerns about global growth, made the appropriate extent and timing of future policy firming less clear than earlier.”

The Fed’s own economic outlook remains upbeat. The minutes described economic data in the final months of 2018 as even stronger than the Fed had expected. Mr. Rosengren said consumers remain “willing to spend,” and that he expected unemployment would continue to fall.

Mr. Evans said he was continuing to forecast “another good year in 2019.”

But uncertainties have piled up in recent months. The minutes said investors were particularly concerned about trade tensions between the United States and China, and about global growth. The minutes did not mention that investors also fear that the Fed will make a mistake by raising interest rates too quickly.

The recent downturn in financial markets is both a symptom of these worries and a potential problem in its own right. Declines in invested wealth, or reductions in lending, can infect the broader economy.

The message from Fed officials is that the Fed will wait to see who is correct.

“If the pessimism evident in financial markets eventually shows through to economic outcomes, there would be less need (and perhaps no need) for further increases in interest rates,” Mr. Rosengren said. “However, my current expectation is that the more optimistic view will prevail.”

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