Fed debated mystery of persistently low inflation
WASHINGTON (AP) Federal Reserve officials at their September meeting struggled to come to terms with persistently low inflation. But in the end, they decided that they should continue to signal the possibility of a third rate hike this year.
The minutes of their discussions released Wednesday show that a group of Fed officials worried that low unemployment could result in a quick rebound in inflation and that a third rate hike was needed. Another group believed that no further increases were called for in the near term.
Economists are split over whether the Fed will raise rates again in December. Some see another rate hike as likely. Others think that if inflation does not start to climb, the Fed will remain on hold.
The Fed has its next meeting Oct. 31-Nov. 1 before a final meeting in mid-December.
Fed Chair Janet Yellen and other Fed officials earlier in the year pointed to transitory factors such as falling prices for mobile cell phone plans as a reason inflation was moving farther from the Fed's 2 percent inflation goal. But with the low inflation persisting, she and other officials have recently acknowledged that perhaps something more long-lasting may be happening.
The minutes of the Fed's September meeting revealed that the mystery over inflation was a key talking point during the two days of discussions.
"Many participants expressed concern that the low inflation readings this year might reflect not only transitory factors but also the influence of developments that could prove more persistent," the minutes said.