policymakers regard inflation as under control, despite concerns among some members
Federal Reserve officials may be close to ending the series of interest rate increases they started 18 months ago, though they will keep going as long as necessary to combat inflation.
Another quarter percentage point increase in the 4.25% target for the overnight lending rate appears to be, as the horse players would describe it, a mortal lock at the 31 January meeting of the Federal Open Market Committee.
Beyond that, the minutes of the 13 December committee released recently said: "Views differed on how much further tightening might be required."
Most of the committee members, read that as meaning by no means all members, agreed that, given the information then in hand, "the number of additional firming steps required probably would not be large", the minutes said.
Not large is obviously imprecise. On the other hand it suggests more than just a move to 4.5% at the end of the month. It would certainly encompass going to 4.75% on 28 March, and perhaps beyond that.
"This does not read like a Fed where everyone is looking for a reason to stop," economist Ian Shepherdson of High Frequency Economics told his clients in December.
No, it doesn't, and the reason is concern about inflation.
The minutes made it plain that the policymakers regard inflation and inflation expectations as being well under control.
Indirect effects of high energy prices on core inflation were muted and robust competition and substantial productivity gains "were helping to contain cost and price pressures".
The participants also noted: "Moreover, measures of labour compensation showed only moderate gains while relatively wide profit margins could allow firms to absorb somewhat larger increases in labour and other costs without boosting prices."
So what's all the worry? Why keep raising the lending rate target?
Well, because some companies have been passing on at least a portion of the higher energy costs to their customers and more might be able to do so later this year, putting pressure on core inflation, the minutes explained.
Then there is the possibility the solidly growing economy might put enough pressure on labour and product markets that inflation pressures build.
"Under these circumstances, and with policy having been accommodative for some time, inflation expectations could rise if monetary policy were not seen as responding to contain such risks," the minutes said.
In other words, don't take chances with one's hard-earned credibility for keeping inflation low. On the other hand, all the uncertainty about energy prices notwithstanding, the risk of a rise in core inflation at this point has to be regarded as pretty low.
Take employers' labour costs, for instance. There is no indication at all that having the US unemployment rate at 5%, the average for the last six months, has caused a faster increase in labour costs.
The Labour Department's employment cost index, which covers changes in wages, salaries and benefits, rose just 3% for private industry workers for the 12 months ended in September. That was the smallest increase in more than five years.
Finally, the economic outlook as seen by both private forecasters and those at the Fed doesn't include the sort of surge in demand by consumers or businesses that should generate significant additional inflation pressures.
According to the minutes, the Fed Board staff forecast presented at the December meeting suggested "growth of economic activity would slow from this year's pace, but remain solid, with output staying near the economy's potential over the next two years".
That's exactly the sort of economic growth Fed officials hoped eventually to achieve when they began raising their overnight lending rate target in June 2004.
If the staff forecast turns out to be right, they will have got exactly where they wanted to go.
Expect US interest rates to rise further, possibly past 4.75%.
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