While Yellen did not comment on monetary policy or the economic outlook, several other FOMC participants offered their views on the prospective pace of rate hikes. More-hawkish policymakers continued to stress that the FOMC should not wait until inflation reaches its objective before moving again: Mester noted that “inflation is not yet at 2 percent, but what we’ve learned is we have to move policy a little bit before we get to the goals or else we’re going to get behind.” George argued that “based on what I see today, I think there’s still opportunity [for another rate hike in 2017.]”
However, other policymakers preferred a more cautious approach. Powell saw room to be “patient”: “I think it’s too soon to make decisions about particular meetings and whether to raise rates, but I think we have the ability, if we keep getting strong growth and strong labor markets, we have the ability to be a little bit patient and that’s not a bad thing.” Kaplan also counseled patience: “I’m not saying we won’t act by the end of the year, but we have the ability to be patient,” citing disagreement on what recent inflation readings mean. He said that, “where there’s a conflict, I think it pays to be patient.” He also repeated his estimate that the nominal neutral rate is “closer to the 2.5 range than it is to 3.”
As for the timing of the change in reinvestment, there appeared to be a consensus around announcing it “soon,” consistent with our expectation of a September announcement. Powell noted that “We’ve worked carefully and patiently to put together a plan, and we’ve socialized that plan and the markets seem to have accepted it, and I do think the time will be here soon for us to begin to normalize monetary policy, the balance sheet.” Kaplan was more explicit: The FOMC should “begin the process of letting the balance sheet run off very soon, i.e. as soon as the September meeting announce that.”