Investing.com - Federal Reserve policymakers reaffirmed their commitment to gradually raising interest rates as the "strong" rate of economic growth continued and inflation remained within its target range, according to the minutes of the Fed's September meeting published Wednesday.
"Participants generally anticipated that further gradual increases in the target range for the federal funds rate would most likely be consistent with a sustained economic expansion, strong labor market conditions and inflation near 2 percent over the medium term," the minutes showed.
The Federal Reserve said real GDP appeared to be rising at a "strong" rate in the third quarter, similar to its pace in the first half of the year, adding that the impact of damage from Hurricane Florence on economic growth in the second half of the year would be "transitory."
The Fed raised its benchmark rate to a range of 2.00% to 2.25% at the conclusion of its two-day policy meeting on Sept. 26 and projected that they’d likely raise rates three times in 2019 after one more hike later this year.
In a sign that Fed members were willing to tolerate a slight overshoot on inflation, several participants commented "that inflation may modestly exceed 2% for a period of time," according to the minutes.
In the wake of recent criticism, the FOMC defended its gradual approach to raising rates, asserting that it prevents the economy from slowing down too quickly and ensures inflation remains stable .
"This gradual approach would balance the risk of tightening monetary policy too quickly, which could lead to an abrupt slowing in the economy and inflation moving below the Committee's objective, against the risk of moving too slowly, which could engender inflation persistently above the objective and possibly contribute to a buildup of financial imbalances."
The Fed's minutes come as investors fret that rising bond yields will increase borrowing costs, stifling global growth. Fed Chairman Jerome Powell pledged in early October to continue raising rates.
"Interest rates are still accommodative, but we’re gradually moving to a place where they’ll be neutral,” neither holding back nor spurring growth, Powell said.
The majority of traders expect the Fed to stand pat on interest rates in November, but hike rates for the fourth time this year in December.
According to Investing.com’s Fed Rate Monitor Tool, the odds of a fourth rate in December stood at more than 80%.