The Fed does not rule out a rate hike if the economic situation improves

Federal Reserve officials at their most recent meeting left room for the possibility of interest rate increases before the end of the year, should economic conditions improve, according to minutes from the session released Wednesday. The central bank’s Federal Open Market Committee voted unanimously to not raise its benchmark rate at the March 19-20 gathering, and simultaneously indicated that it didn’t see a likelihood for any hikes through 2019.

However, that came after a discussion in which members said they would be watching the data on an economy most of them expected to improve through the year. “Several participants noted that their views of the appropriate range for the federal funds rate could shift in either direction based on incoming data and other developments,” the meeting summary stated. “Some participants indicated that if the economy evolved as they currently expected, with economic growth above its longer-run trend rate, they would likely judge it appropriate to raise the target range for the federal funds rate modestly later this year.”

Futures markets are currently pricing in no chance of an increase and in fact a considerable possibility that the Fed might choose to cut rates.

Judging by the minutes, the discussion steered clear of politics, focusing on the monetary policy calculus that must take into account a labor market near a 50-year low in unemployment and an economy pressured by waning fiscal stimulus. Members said they viewed the upside and downside risks as “roughly balanced.”