Federal Reserve Expresses Hesitation with Additional Rate Hikes

The minutes from the Federal Open Market Committee’s December meeting were released, showing the board’s reluctance to increase interest rates amid weakening inflationary pressures and slowing global growth. The Bureau of Labor statistics furthered this point when releasing its December Consumer Price Index, which revealed the first monthly decrease in prices in nine months. The inflationary gauge did rise on an annualized basis, albeit slower than in prior months. Also, unemployment insurance claims fell unexpectedly in the first week of the new year. 

• The Bureau of Labor Statistics released its December 2018 consumer price index last week, revealing narrow monthly deflation. After remaining unchanged in November, the index decreased 0.1 percent, constituting the first drop of prices in nine months. For the trailing twelve months, the index increased 1.9 percent. Energy and food seem to be driving the decline, as the core inflation measurement grew 0.2% monthly and 2.2% annually. Signs of moderate and stable inflation support recent statements from the Fed about being cautious with further interest rate hikes this year.

• For the week ending January 5, the number of Americans filing for unemployment benefits fell unexpectedly to 216,000 claims. The prior week was revised upward to 233,000 claims, constituting a 17,000-claim drop between the weeks. However, the four-week average continues to climb, up 2,500 to 221,750 claims. The fall in joblessness underpins the continued strength of the labor market, despite recent economic and financial turmoil.
  

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• Minutes from the Federal Open Market Committee’s December meeting were released mid-last week. The minutes show a growing desire for patience on the committee, despite the quarter-percentage point rate hike. Officials generally agreed that further gradual rate increases would be appropriate, although some members said that the lack of inflationary pressures argued against another increase.