The continued weakness in core inflation concerned "several" Federal Open Market Committee members, while "a few" suggested it may take longer to get to 2% inflation than the panel anticipated, according to minutes of the January Federal Open Market Committee meeting.
The conditions needed to start normalization were discussed. "There was wide agreement that it would be difficult to specify in advance an exhaustive list of economic indicators and the values that these indicators would need to take," according to the minutes. "Nonetheless, a number of participants suggested that they would need to see further improvement in labor market conditions and data pointing to continued growth in real activity at a pace sufficient to support additional labor market gains before beginning policy normalization."
The panel expressed concern about markets overreacting to the eventual elimination of the word "patient" from the FOMC statement. The group said the "data dependency" of policy should be emphasized and when normalization approaches, the FOMC could be challenged trying to communicate while being limited by the "specificity" it would be able to offer regarding timing.
"Looking ahead, some participants highlighted the potential benefits of streamlining the Committee's post meeting statement once normalization has begun," the minutes noted. "More broadly, it was suggested that the Committee should communicate clearly that policy decisions will be data dependent, and that unanticipated economic developments could therefore warrant a path of the federal funds rate different from that currently expected by investors or policymakers."
