According to the minutes of the central bank’s May meeting released Wednesday afternoon, the Federal Reserve made a strong commitment to a 0.50% move in June and July.
On May 4, policy makers raised short-term interest rates by 0.50% to a target range between 0.75% and 1.00% to moderate inflation. Higher interest rates make borrowing more expensive, which should theoretically reduce consumption which enables companies to raise prices.
But the minutes of the meeting outline a firmer agreement among Fed officials for a 0.50% move after at least the next two meetings, which are scheduled for June 14-15 and July 26-27.
“Most participants decided that an increase of 50 basis points in the target range would be appropriate in the next few meetings,” read the minutes of the May 3-4 meeting.
The Fed is often not so direct about what it will do in future meetings, as the institution often prioritizes the flexibility to change the course of its policy as data changes. But with inflation currently at levels not seen since the early 1980s, the Fed is more inclined to offer public guidance on its intentions to raise rates further.
Following the May 4 rate hike, Fed Chairman Jay Powell told the press that there was a “broad sense” on the committee that a further 0.50% “should be on the table” for the next two meetings.
The Fed chairman who spoke to Yahoo Finance earlier this month was part of that “broad” endorsement.
Cleveland Fed President Loretta Meester told Yahoo Finance on May 10 that she would be “comfortable” with that strategy, and Atlanta Fed President Rafael Bostik said the same day that she would be planning to “have the next two, or maybe three, meetings”. Can see 0.50% move.
St. Louis Fed Chairman James Bullard – who once entertained the possibility of a 0.75% move – told Yahoo Finance on May 11 that his allies had “integrated” around that plan for two 0.50% moves.
Fed Minutes notes that Fed officials will have to continue raising rates beyond estimates of the neutral rate of interest, which is defined as the level of interest rates economists believe is neither conducive to economic growth. Is neither stimulating nor restrictive. This estimate means rates will rise above 2.5% at some point during this cycle.
“Participants agreed that the economic outlook was highly uncertain and that policy decisions should rely on data,” Fed Minutes added as a warning.
Inflation remained a pressing concern for Fed officials, compounded by the Russian invasion of Ukraine and the COVID-related shutdown in China. Both events are causing disruption in the global supply chain, partly leading to a rise in prices. Fed officials said those pressures could ease at some point, but the timing and magnitude would be “uncertain.”
Note in the minutes that all policymakers on the committee supported the move to 0.50% in May, in addition to plans to begin shrinking the Fed’s $9 trillion balance sheet from June 1.
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Brian Cheung is a reporter for Yahoo Finance covering the Fed, economics and banking. You can follow him on Twitter @bcheungz,
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