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Fed urges patience as inflation lags

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Federal Reserve Chair Janet YellenImage source, Getty Images
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Federal Reserve Chair Janet Yellen last month said the Fed is concerned about lagging inflation

Policymakers at the US central bank are growing increasingly concerned about lagging inflation rates.

Many policymakers are worried that the slow pick-up in price increases may be due to long-term trends, not just short-term factors.

They urged that "some patience" guide the Fed as it considers plans to raise interest rates.

Many analysts expect the Federal Reserve to raise interest rates once more this year.

But several members said their willingness to take action would depend on incoming economic data. A few said a rise should be deferred until it was clear that inflation trends were on pace to hit the Fed's 2% target.

"All agreed that they would closely monitor and assess incoming data before making any further adjustment to the federal funds rate," they said.

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The publication of the minutes from the Fed's September meeting follows recent remarks and speeches by Fed policymakers that have highlighted questions about inflation rates.

Interpretation of new data is likely to be complicated by efforts to tease out temporary effects from recent hurricanes, which wreaked havoc in parts of the country, including Texas and Florida.

Federal Reserve Chair Janet Yellen also last month focusing on the Fed's uncertainty about what is driving inflation trends.

She had previously stressed that the lagging inflation was probably due to temporary factors, such as lower prices for cellphone plans.

But in her speech, she said other factors could include long-term changes to health care prices, driven by the Affordable Care Act, as well as economic shifts unleashed by the internet, such as online shopping and greater price transparency.

The uncertainty strengthens the case for "gradual" adjustments, she said.

Sarah House, a Charlotte-based economist at Wells Fargo, said she thinks the Fed remains on track to raise interest rates once more this year.

But she said the discussion is a reminder to investors that increases will remain relatively limited.

"The Fed is in a tightening cycle, but it looks nothing like the tightening cycle we've seen in previous years," she said.