The movement of monetary policy away from accommodative was the key theme of the September FOMC, held late in the month and one that produced an as-expected and incremental 25-basis-point rate hike. The meeting's statement struck the boilerplate phrase that "policy was accommodative" but its removal, as Jerome Powell later said at the subsequent press conference, was not intended to have policy implications as is repeated in today's minutes. "Almost all" of the 17 members at the meeting agreed to remove the word which they said could suggest a false sense of precision as the Fed's target rate moves from the low 2 percent area toward 3 percent and what they consider to be the long-term neutral rate, that is the rate that neither slows nor stimulates economic activity.
Yet in what is the meat of today's news, "a number" of the members (exact counts are not given in the minutes) warned that the Fed's policy rate would eventually have to be raised above the neutral rate and into the "restrictive" zone. "Several" members said inflation could exceed the Fed's 2 percent target which underscores the perceived need to slow the economy. In contrast, however, "a couple" of the members said they would not favor moving rates past neutral. Members in general, and no surprise here, generally anticipated that sticking to their well telegraphed plans for further gradual rate hikes would be necessary. And based on FOMC projections which were also released at the meeting, that means one more 25-basis-point hike before year-end followed by three more gradual hikes next year.
The FOMC's assessment of the economy was strength pretty much throughout and members saw risks balanced and no significant chance that conditions would change. Trade policy was considered a source of uncertainty and the assessment of Hurricane Florence, which hit the Carolinas at mid-month, was that its impact would be "modest".
The fact that some of the members are leaning toward more, not fewer, rate hikes in the future is not welcome news for President Trump who has sharply criticized the Fed for raising rates this year. The conflict between the less stimulative policy of the Federal Reserve and the aggressively stimulative policy of the administration is, for the economy, the most important story of 2018. Note that of the 17 members, eight had the privilege of voting and they did unanimously so to raise rates.