WASHINGTON, DC–The Federal Reserve has published its minutes from its meeting at the end of January and appears to be ready to raise the federal funds rate again, if not at its next meeting in March, then certainly later in the year.

“A majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate,” according to the minutes.

More worrisome to the market, the language the Fed used — “further gradual firming may be appropriate” — suggested that it may raise rates four times in 2018 instead of the previously expected three. “There appears to be some scope for penciling in a fourth rate increase in 2018 if the Fed board under Chair Powell maintains its current stance, according to Savills Studley Chief Economist Heidi Learner.

The March 20-21 meeting will be the first led by the new chair, Jerome Powell.

Strong Growth, Strong Tax Stimulus

The Fed cited the robust economic growth, favorable financial conditions and the $1.5 trillion tax cut that was passed at the end of last year in its minutes as some of the factors behind its reasoning. “The effects of recently enacted tax changes — while still uncertain — might be somewhat larger in the near term than previously thought,” according to the minutes.

It was precisely this fear — that the Fed would raise rates — that in part led to the recent stock market volatility. The widespread theory was that the tax cuts would overstimulate an already-stimulated economy, prompting the Fed to raise rates.

The Fed also signaled it will continue to keep its eye on inflation. “Inflation on a 12-month basis was expected to move up this year and to stabilize around the committee's 2 percent objective over the medium term,” the minutes said. “However, participants judged that it was important to continue to monitor inflation developments closely.”

Instant Insights /

Fed Minutes Suggest That Higher Rates Are Coming

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