Federal Reserve minutes show bank upping estimates of growth in 2018–and projecting need for more interest rate increases

Today’s release of the minutes from the Federal Reserve’s January 30-31 meeting show the central bank estimating economic growth at 2.5% for 2018 and noting that the outlook for stronger economic growth raised the likelihood for continued, gradual interest rate increases.

Fed members felt that it was increasingly probable that the economy would hit its inflation target of 2%.

In short the Fed signaled that it would continue the policies of outgoing Fed chair Janet Yellen as Jerome Powell took over the position.

That said, it’s also clear that the Fed is spending a lot of time thinking about whether faster growth would lead to faster inflation–and how much faster. The Federal Open Market Committee, the Fed’s rate-setting body, said that it expects the annual pace of price increases to move up in 2018. Total PCE price inflation (PCE, or Personal Consumption Expenditure, is the Fed’s preferred inflation measure) in 2018 was projected to be somewhat faster than in 2017; core PCE prices were forecast to rise significantly faster in 2018.