Following Wednesday’s FOMC meeting, the two members who dissented (Evans and Kashkari) offered full-throated defenses of their decisions. Evans favored a pause because it would have “better supported a general pickup in inflation expectations” (12/15). He argued that the FOMC needed additional time to ascertain inflation progress. Kashkari cited sluggish wage growth as evidence of remaining labor market slack (12/18). He saw a rate hike as potentially increasing the chance of a recession and warned that the current yield curve suggests that the Fed shouldn’t be raising the funds rate further unless inflation picks up.
Williams, who did support a rate hike at last week’s meeting and will vote next year, offered a much more optimistic view of the economic outlook (12/18). He declared that “we’re ending the year with some very good momentum going into 2018.” He argued that continuing the gradual pace of rate hikes was necessary because “As we move interest rates back up to more normal levels as the economy improves, that will reduce the risks of the economy overheating and reduce some of the risk of markets overheating as well.” Brainard, whose comments were mainly focused on workplace development, also sounded upbeat (12/13). She noted that “Too many Americans were sitting on the sidelines…In the past few years, the job market has gotten so strong that many of these people have come off the sidelines–and many are now back at work.” She concluded: “This is a great time to find a job.”