WASHINGTON - Federal Reserve officials at their January meeting believed improving global economic prospects and the effects of recently passed tax cuts had raised the prospect for solid economic growth and for continued interest rate increases in 2018.
The minutes of the Fed's Jan. 30-31 discussions showed that the officials were more optimistic about the economy than they had been in December. They noted a stronger U.S. and global economy and rising expectations that the tax cuts passed in December would boost growth.
The minutes said "a majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate."
The Fed did not raise rates at the January meeting, which occurred before the February stock market plunge and turbulence.
In a statement, Capital Economics Chief Economist Paul Ashworth said, "The upshot is that the addition of 'further' in the accompanying policy statement was intended to convey a more hawkish stance."
Regarding the number of rate increases the Fed is likely to make during 2018, "We have long expected the Fed to hike interest rates four times this year, on the basis that Congress would loosen fiscal policy and core inflation would rebound markedly in 2018," said Ashworth. "That view is now rapidly gaining traction in the markets and among other economists."
After spiking higher immediately after the minutes' release, stocks reversed course in late afternoon trading Wednesday, as the 10-year U.S. Treasury bond's yield leaped up just above 2.95 percent, the highest since January 2014.