Fed grapples with rate hike

Federal Reserve officials are still debating in private when will be the right time to raise interest rates for the first time since the financial crisis.

Minutes from the Fed’s latest meeting in March show ongoing discussion about whether the Fed should hike rates sooner rather than later. Some officials favored a rate increase in June. Others said the economy was weak enough a hike could be put off until later in the year. And still others believe the economy would not be ready for an increase until 2016.

{mosads}The persistent divisions at the Fed suggest that the central bank, which normally prefers to operate by consensus whenever possible, could have a tough time settling on a time for a rate increase, and after that, how often to increase rates once that process has begun.

The Fed has ruled out a rate hike at its April meeting, but has left the door open to increases at any subsequent meetings. But officials have also said they would need to see continued improvement in the economy before being ready to increase rates, and a recent slowdown in economic data has many believing the Fed could be pushing back the date for the eventual hike.

The ongoing discussion indicates that Fed officials are still trying to get a handle on the nation’s economic trajectory. While the economy has enjoyed a run of several months of strong data, there have been some signs that the surge could be slowing. The March jobs report came in much lower than expected, as the economy added just 126,000 jobs, good for the lowest in over a year.

The Fed’s last meeting was before that report came out.

At the March meeting, the Fed updated its policy statement to remove language stating the central bank could be “patient” when it came to raising rates. The minutes show that “almost all” Fed officials agreed on the removal of the language, and instead wanted the policy language to give the Fed the flexibility to raise rates on an upcoming meeting.

But the minutes also show that the Fed is still debating how to communicate when it finally is ready to raise rates. Two participants said the Fed should notify markets before the meeting when it would raise rates, but two others pushed back on that idea, saying it would undercut the Fed’s ability to evaluate conditions on a meeting-by-meeting basis.