Growing concerns over stability of US inflation expectations

September FOMC minutes also reveal growing concerns amongst a sizable subset of the committee over the stability of inflation expectations. Some participants were concerned that downside risks to inflation could be realized if the committee raised rates before it was clear that economic growth would remain at an above-trend pace. 

These members went so far as to question the long-term credibility of the committee if after a "premature tightening" inflation remained below the committee's 2% target. Until Chair Yellen's speech on September 24, it was not aware that this was a predominant concern of the committee. 

Of course, in the split nature of the today's FOMC, this concern was balanced by some other participants who expressed fear that delaying the start of normalization would risk an undesired buildup in inflationary pressures and/or increase financial stability risks.

"In addition, the minutes reflected more dissent over the cumulative improvements in labor markets than anticipated and more than we had observed in the past", says Barclays. 

A few members noted that underutilization in labor markets had been eliminated but some others believed that further progress was possible before labor market conditions would be consistent with the committees' mandate of full employment.