US Federal Reserve officials last month kept key interest rates unchanged but saw the decision as a “close call”, minutes from the meeting show.
Minutes of the September 20-21 meeting released on Wednesday showed Fed officials were inching closer to hiking rates for the first time since last December.
But they decided to hold off, given that inflation was still running below their 2% target and there was little sign of rising wage pressures.
The minutes said that some officials believed it would be appropriate to raise rates “relatively soon” if the labour market kept improving.
Analysts said they believed the minutes provided further evidence that the Fed will keep rates unchanged at the next meeting in November but will be ready to raise rates in December.
“The meeting minutes make plain that the case for a rate hike was a close call and it looks like the only way Yellen could hold down the get-going voices of the hawks was to promise them a rate hike later this year,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.
“At this point there would have to be some very weak economic data for the Fed not to raise rates in December.”
The minutes, released after the customary three-week lag, covered the Fed’s September 20-21 meeting.
After that meeting, the Fed announced that it was keeping its key interest unchanged but sent a strong signal that it could raise rates before the year’s end.
The September decision was approved on a 7-3 vote with a rare three dissents. Three presidents of Federal Reserve regional banks – Esther George of Kansas City, Loretta Mester of Cleveland and Eric Rosengren of Boston – all dissented. All wanted the Fed to raise rates at the September meeting.
The deep divisions were evident in the minutes, which said that the officials pushing for an immediate rate hike were concerned that further delay risked eroding the Fed’s credibility, “given that recent economic data had largely corroborated the committee’s economic outlook”.
But the majority of Fed officials argued for delay, contending that inflation was still very low and there was still room for the unemployment rate to fall further without triggering high inflation.
“Some participants believed that it would be appropriate to raise the target range for the federal funds rate relatively soon if the labour market continued to improve and economic activity strengthened, while some others preferred to wait for more convincing evidence that inflation was moving towards the committee’s 2% objective,” the minutes said.
Last week, the US government reported that employers added 156,000 jobs in September, fewer than the 167,000 in August and well below last year’s monthly average of 230,000.
Analysts believe that the central bank will wait until its last meeting of the year in December before raising rates.
The Fed’s next meeting is on November 1-2, but it is not expected to make a move then, given that it will be just a week before the presidential election.
In December last year, the Fed hiked its benchmark lending rate after leaving it at a record low near zero since December 2008.
It indicated at the time that it might raise rates another four times in 2016.
But since then, turbulence in financial markets, concerns about China and an unexpected vote by Britain in June to leave the European Union have prompted the Fed to delay further rate hikes.