Fed transcripts show doubts about need for 2015 rate hike

WASHINGTON (AP) — Newly released transcripts show that many Federal Reserve officials had concerns in late 2015 over whether they were making a mistake in raising a key interest rate for the first time in nearly decade.

Transcripts of their discussions, released Friday, showed that the chief concern was whether the Fed would be acting prematurely in starting to raise rates given how low inflation was at the time.

In the end, the Fed unanimously approved a quarter-point hike in its policy rate and the first change in the rate since the central bank slashed it to a record low of 0 to 0.25% in December 2008 at the height of the financial crisis.

During their debate on the change, many officials expressed worries that the small rate hike was being made even though inflation for the past six years had fallen below the Fed's 2% target.

The Fed manages interest rates to achieve two goals — keeping inflation under control while promoting maximum employment. It hikes rates to slow the economy if inflation appears to be rising too quickly and it cuts rates to give the economy a boost if the jobless rate is too high.

Fed Chair Janet Yellen, who has been tapped by President-elect Joe Biden to be Treasury secretary, said at the time in arguing for the small initial rate hike that inflation had been held down in 2015 by a sharp drop in oil prices which had kept the Fed's inflation target running below 0.5%. But she said with oil prices rising again, she was “reasonably confident” that inflation over the next two to three years would reach the Fed's 2% target, and for that reason a small initial move to hike rates was warranted.

However, in 2016 falling prices for such things as cell phones kept inflation low and since that time, inflation has continued to run below the...