Roundup: Most Fed officials believe December rate hike justified

Federal Reserve officials believed the conditions for beginning raising the interest rates would be met in December, minutes of the Fed's latest monetary policy meeting showed on Wednesday.

"Most participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labor market, and inflation, those conditions could well be met by the time of the next meeting," according to minutes of the Fed's Oct. 27-28 meeting released on Wednesday.

The Fed has been keeping the key interest rates at nearly zero for about seven years given the U.S. economy is slowly recovering from the worst financial crisis in decades.

The minutes showed that some participants thought that the conditions for beginning the policy normalization process had already been met.

Nonetheless, most participants emphasized that the actual decision would depend on the implications for the medium-term economic outlook of the data received over the upcoming intermeeting period.

A number of participants concerned about a delay in policy firming could increase uncertainty in financial market and build up financial imbalances.

They also worried that a decision to defer policy firming could be interpreted as signaling lack of confidence in the strength of the U.S. economy or erode the Committee's credibility.

Since the October meeting, a number of Fed officials have spelt out that a rate hike in December was on the table.

In congressional testimony on Nov. 4, Federal Reserve Chair Janet Yellen said December would be a "live possibility" for a rate hike if the ming data were supportive.

Despite lessening concerns about the implications of recent global economic and financial developments for domestic economic activity and inflation, several participants indicated the downside risks to the outlook remained.

They were concerned about a potential loss of momentum in the economy and the associated possibility that inflaton might fail to increase as expected, which suggested the normalization process might not be warranted.

They also noted uncertainty about whether economic growth was robust enough to withstand potential adverse shocks, given the limited ability of monetary policy to offset such shocks when the federal fund rate is near its lower bound.

The U.S. economy grew 1.5 percent in the third quarter, a reasonable markdown from a brisk growth of 3.9 percent in the previous quarter.

The labor market improved significantly in October with newly-added nonfarm payrolls gaining 271,000. Fed officials agreed at the October meeting that the underutilization of labor resources had been reduced since earlier this year.

Fed's next monetary policy meeting will be held on Dec. 15-16. Endit