The decision to liftoff from zero lower bound rates was a "close call" for some Federal Open Market Committee voters, as "almost all" of the 17 participants believed conditions for a rate hike had been met, according to minutes of the December 15-16 meeting, released Wednesday.
"Some members said that their decision to raise the target range was a close call, particularly given the uncertainty about inflation dynamics, and emphasized the need to monitor the progress of inflation closely," the minutes revealed.
At the meeting, the FOMC voted to increase the fed funds rate a quarter point to 0.25% to 0.50%.
Although all 10 voters agreed on the rate hike, the Summary of Economic Projections, released simultaneously with the FOMC statement, indicated two members wanted the panel to hold off raising rates until 2016.
In its statement, the FOMC said it expected the economy to grow at a speed that would "warrant only gradual increases in the federal funds rate," a term many were hoping would be defined in the minutes. But the minutes did not offer any clues on what the FOMC means by "gradual."
However, the minutes noted, "a number of participants" noted inflation remains "well below the Committee's objective" and there is "considerable uncertainty" about the outlook, "it would probably take some time for the data to confirm that inflation was on a trajectory to return to 2% over the medium term."
Continued drops in oil prices will "likely … exert some additional transitory downward pressure on inflation in the near term," the minutes stated. While the panel was said to be confident inflation would rise over the medium-term towards the FOMC's 2% goal, "some members" saw "considerable" risk in future inflation levels.
While interest rates are seen rising "slowly over the next few years," the minutes note, "the appropriate path for the federal funds rate would depend on the economic outlook as informed by incoming data."
