Arizona Tribune - Several US Fed officials concerned over 'stalled' disinflation: minutes

The central bank voted 11-to-1 last month in favor of cutting interest rates by a quarter point and signaled a slower pace of cuts ahead, raising concerns that interest rates would have to remain higher for longer.

The decision was taken against the backdrop of a small uptick in inflation over the last few months of the year, moving the Fed's favored inflation gauge away from its long-term target of two percent.

At the same time, growth has remained robust and the labor market relatively resilient, reducing the pressure on the Fed to cut rates swiftly.

The Fed's decision to cut rates to between 4.25 and 4.50 percent was not unanimous -- an unusual occurrence -- with Cleveland Fed president Beth Hammack voting to leave rates unchanged.

During the meeting, "several" members of the Fed's rate-setting committee raised concerns that the "disinflationary process may have stalled temporarily or noted the risk that it could," the Fed said in minutes of the meeting published on Wednesday.

"Almost all participants judged that upside risks to the inflation outlook had increased," it added.

Fed officials were also concerned about how to model the likely impact of changes to trade and immigration policy pledged by Donald Trump, although they did not refer to the president-elect by name.

Some chose to factor some assumptions into their economic forecasts, while others chose not to do so, and some refused to say whether or not they had.

Trump has pledged to impose sweeping tariffs on goods entering the United States, and to implement a policy of mass deportation of undocumented workers, leading many economists to predict inflation could be higher than previously predicted, and growth lower.

Trump and his economic advisors have challenged those assumptions, insisting that his policies will be disinflationary and pro-growth.

During their rate discussions, a few participants said it "might be difficult to distinguish more persistent influences on inflation from potentially temporary ones, such as those stemming from changes in trade policy that could lead to shifts in the level of prices."

Before the minutes were published, futures traders assigned a probability of around 95 percent that the Fed would keep its key lending rate unchanged at its next rate decision later this month, according to CME Group.

H.Romero--AT