Officials are divided over stimulus vs. inflation and the Fed’s next move.
WASHINGTON – Federal Reserve officials are increasingly divided about how much better the economic recovery is likely to get.
Officials are more confident that the economy is gaining strength after years of false starts, according to an account of the most recent meeting of the Fed’s policymaking committee, published Wednesday.
The Fed’s chairwoman, Janet Yellen, and her allies maintained the central bank’s stimulus campaign at the July meeting, arguing that the Fed can now help millions of unemployed Americans find new jobs.
An increasingly vocal group of dissenters, however, saw evidence that the Fed had nearly exhausted its ability to repair damage caused by the recession. They argued that the Fed must retreat quickly to maintain control of inflation.
The debate will receive a public airing Friday and Saturday when central bankers, including Fed officials, and academic economists convene in Jackson Hole, Wyoming, for an annual conference held by the Federal Reserve Bank of Kansas City. This year’s theme is labor markets.
Labor markets have improved more quickly than the Fed expected at the beginning of the year, according to the minutes of the July meeting. The unemployment rate, in particular, stood at 6.2 percent in July. But while officials agree that the finish line for the Fed’s extraordinary stimulus campaign is drawing closer, they do not agree on where it is.
“Participants generally agreed that both the recent improvement in labor market conditions and the cumulative progress over the past year had been greater than anticipated and that labor market conditions had moved noticeably closer to those viewed as normal in the longer run,” the minutes said. “Participants differed, however, in their assessments of the remaining degree of labor market slack and how to measure it.”