The minutes from the January meeting of the Federal Open Market Committee were released on Wednesday, showing Federal Reserve officials forecasting increased economic growth and inflation. Both factors led the Fed officials to stand firm on their plans to gradually continue raising the benchmark interest rate in 2018.
The Dow Jones industrial average initially spiked 303 points after the release of the minutes, according to CNBC, then eventually closed down 167 points. The benchmark 10-year Treasury note also hit a four-year high in the aftermath of the minutes’ release.
According to the minutes, the Federal Reserve officials in January had revised their economic projections upwards following their December meeting, noting increased consumer spending and confidence. "A majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate," reads the minutes summary. It notes that most of the FOMC members forecast inflation hitting the Fed's 2 percent inflation goal during the "medium term."
The minutes say that “Members expected that economic conditions would evolve in a manner that would warrant further gradual increases in the federal funds rate. They judged that a gradual approach to raising the target range would sustain the economic expansion and balance the risks to the outlook for inflation and unemployment."
The next FOMC meeting is scheduled for March, when the Fed is widely expected to announce another rate hike, this one likely up to a target rate of 1.5 percent to 1.75 percent.
The minutes also show the Fed officials commenting on the likely effects of the tax reform bill passed at the end of last year. The minutes read, in part, “With regard to how firms might use part of their tax savings to boost compensation, a few participants suggested that such a boost could be in the form of one-time bonuses or variable pay rather than a permanent increase in wage structures. It was noted that the pace of wage gains might not increase appreciably if productivity growth remains low. That said, a number of participants judged that the continued tightening in labor markets was likely to translate into faster wage increases at some point."
You can read the full Fed minutes for the January FOMC meeting by clicking here.