Fed minutes show diverging views on inflation

The Federal Reserve's monetary policy-setting committee viewed "current stance of monetary policy" as "appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the committee’s symmetric 2% objective," according the the minutes of its Jan. 28-29 meeting.

Still, uncertainties remain, "including those posed by the outbreak of the coronavirus," which warrants "close watching", they said.

Inflation, however, continued to run below the FOMC's 2% target. Some FOMC participants expect inflation to move closer to 2% in coming months as unusually low readings in early 2019 drop out of the Y/Y comparison.

A few, though, expressed "less confidence" in that outlook, noting that inflation has lagged that target even as resource utilization has increased and pointed to global and tech-related factors "that could continue to suppress inflation."

A couple of participants observed that some alternative inflation indicators, including trimmed mean measures, suggest that there has been a "modest step-up in underlying inflation during 2019."

One interesting note is that "several participants suggested that inflation modestly exceeding 2% for a period would be consistent" with achieving the committee's longer-run inflation goal.

On the employment situation,  "a few participants observed that the actual level of employment might still be below maximum employment and that maintaining the present monetary policy stance would allow the economy to achieve that maximum level." That could explain why inflation hasn't been ticking up the way the Fed expected it to.