Another hike in the federal funds rate is likely at the June 12-13 meeting of the Federal Open Market Committee, according to minutes of the May 1-2 meeting released Wednesday.
The committee raised the rate by 25 basis points at its March 21 meeting to a range of 1.5% to 1.75%. Since that earlier meeting, if indicators of a strengthening economy and expectations of upward movement on inflation continue as expected, another hike "would likely soon be appropriate," the minutes said.
Committee members did caution that there is a "particularly wide" range of possible outcomes for economic activity and inflation, with another concern being uncertainty surrounding trade issues.
The memories of the financial crisis are also keeping members alert. While they believe regulatory changes enacted since then have strengthened the financial system, "a few participants emphasized the need to build additional resilience in the financial sector at this point in the economic expansion," the minutes said.
The minutes did not provide many surprises for investors, said Bob Miller, managing director and head of U.S. multisector fixed income at BlackRock (BLK), but one insight came from the committee inserting the term "symmetric" to further reinforce that the 2% inflation objective is not a ceiling, but rather a medium-term target. "Indeed, this suggests that the committee will tolerate some movement above that level, as long as the longer-term balance of risks are consistent with 2% inflation," Mr. Miller said in a statement.