U.S. Fed officials divide over June rate hike

U.S. Federal Reserve officials are dividing over whether the central bank should raise interest rate in June, according to the minutes of the Fed's monetary policy meeting on March 17-18 published on Wednesday.

Several Fed officials believed the economic data and outlook were likely to warrant first rate hike at the June meeting, while others held it would be appropriate to begin raising rates later in the year in view of low inflation condition, and a couple of officials suggested economic outlook would likely not call for liftoff until 2016.

The officials supporting first liftoff later this year argued that the effects of energy price declines and the appreciation of U.S. dollar would continue to weigh on inflation in near term.

The price index for the personal consumption expenditure (PCE), a gauge for the inflation level preferred by the Fed, increased only 0.3 percent year on year in February, far below the Fed's 2 percent target.

In its statement after the March meeting, the Fed dropped the word "patient" from its policy statement, setting the stage for an interest rate hike later this year, but ruled out a rate hike in April.

The Fed chair Janet Yellen said after the March meeting that the Fed would start raise interest rates if the labor market improvement continues and the central bank is "reasonably confident" that inflation will move back to its target of 2 percent.

The minutes showed the reason for Fed's officials' confidence on inflation outlook. "Further improvement in the labor market, a stabilization of energy prices, and a leveling out of foreign exchange value of the dollar were all seen as helpful in establishing confidence that inflation would turn up," showed the minutes.

Fed officials also expressed some concerns about the economic outlook, such as a strong dollar. According to the minutes, several Fed officials worried the strong dollar would restrain the U.S. net exports and economic growth for a time, and a few noted accommodative monetary policies adopted by some foreign central banks could lead to further appreciation of dollar.

Yellen "set a very low bar" for what it would require for the central bank to start the tightening cycle, and the Fed could start hiking interest rates even with inflation running well below the central bank's target of 2 percent, as long as the labor market continues to improve, David Stockton, senior fellow at the Peterson Institute for International Economics and former chief economist for the Federal Reserve Board from 2000 to 2011, told Xinhua in a recent interview. Endite