Members of the Federal Open Market Committee were divided about whether their inflation objectives were on track enough to raise rates further this year, according to minutes of the panel's July 26 meeting released Wednesday.
Some members emphasized that when considering further rate hikes, they would look at incoming information "to assess the likelihood that recent low readings on inflation were transitory," the minutes said.
"It looks like there is a little bit of a debate going on with the committee over what is happening with inflation in terms of their projections. They are close, but I don't think they are going to be in any rush to raise rates," Erik Schiller, managing director, head of developed market interest rates with PGIM Fixed Income, said in an interview.
"They have the luxury of time," agreed Eric Winograd, AllianceBernstein (AB) senior economist. "Our best case is still for a rate hike in December, but they have four more months of data before they make their decision."
The last rate hike was July 14, when FOMC members voted to increase the federal funds rate by 25 basis points to a 1% to 1.25% range, following a similar move in March.
The minutes revealed no change in the committee's plans to begin reducing its balance sheet, as long as the economy evolved as expected. "There's no reason to expect anything other than an announcement in September," Mr. Winograd said.
Mr. Schiller of PGIM noted that between a very low level of discount rates globally and central bank actions, "the inflation they may be fighting is asset price inflation.
"You can't be underinvested in fixed income. I think fixed income and bonds will continue to generate (returns), despite low yields," Mr. Schiller said.