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Fed Officials Point to Another Rate Increase ‘Fairly Soon,’ Then a Shift to a More ‘Flexible’ Approach

After several years of steadily raising interest rates, Federal Reserve officials discussed this month a more flexible policy of setting rates. But that doesn’t mean rates won’t rise further, as most officials said another rate increase was likely, perhaps as soon as next month.

On Thursday, the Fed’s Open Market Committee published the minutes of a meeting in early November. “Almost all participants expressed the view that another increase in the target range for the federal funds rate was likely to be warranted fairly soon” if employment and inflation remain in-line or stronger than the Fed’s current expectations, the minutes said.

A few officials expressed concern about rates moving too high too quickly. The minutes showed a couple of participants felt the benchmark fed funds rate “might currently be near its neutral level and that further increases in the federal funds rate could unduly slow the expansion of economic activity.”

Committee members showed a preference to keep a flexible stance, noting that monetary policy wasn’t on a “preset course” and needed to be adjusted by keeping an eye on economic data.

“Many participants indicated that it might be appropriate at some upcoming meetings to begin to transition to statement language that placed greater emphasis on the evaluation of incoming data in assessing the economic and policy outlook,” the minutes said. “Such a change would help to convey the committee’s flexible approach.”

On Wednesday, U.S. stocks staged their strongest one-day rally in eight months after Fed Chairman Jerome Powell said interest rates are close to neutral. Investors took the comments as a shift toward a more dovish stance on interest rates.

The release of the FOMC’s minutes helped erase early losses in U.S. stock indexes Thursday. The Dow Jones Industrial Average closed Thursday trading up 0.1% at 25,338.84, while the S&P 500 Index gained 0.2% to 2,737.76.