US central bankers stressed their “strong commitment and determination” to bring rising inflation under control, including more large interest rate hikes, according to minutes of the latest policy meeting released on Wednesday.
With US inflation rising at the fastest pace in nearly four decades, the Fed’s policy committee earlier this month raised the key rate by half a point – the biggest increase since 2000 – and most members said a similar increase. “Probably appropriate” next two meetings.”
Fed Chairman Jerome Powell said extra-large steps should be “on the table” in upcoming discussions, and could help calm critics sounding the alarm about the threat of inflation.
But the minutes show that members of the Federal Reserve’s policy committee are acutely aware of the threat of rising prices, which dent income, and say they need to raise the benchmark lending rate and reduce inflation in a big way. The unloading of bond holdings should move “rapidly,” which he said was “much higher.”
While the pace of consumer price growth slowed slightly last month, jumping 8.3 percent from April 2021 to 8.5 percent last month, Fed officials warned that “price pressures remain elevated and it is too early to believe that inflation will peak.” But it was.”
The Fed slashed interest rates to zero at the start of the pandemic to prevent a severe economic downturn and also intensified bond purchases to pump liquidity into the financial system, but those measures began to reel in as prices plummeted. The boom came as the economy recovered.
The process began in March with a quarter-point rate hike, and from June 1, it will begin reducing its asset holdings. The next policy meeting is June 14-15.
The Minutes confirmed that central bankers are committed to a number of steps to remove stimulus for the economy, but added that they will have to go even further and may have to put the brakes on the economy, depending on whether How does the approach develop?
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“All participants reaffirm their strong commitment and determination to take the necessary measures to restore price stability,” the minutes said.
However, there was no mention of the possibility of even more aggressive growth in the three-quarter-point rate.
In fact, Ian Shepherdson of Pantheon Macroeconomics said he expects “a less bullish tone to emerge in June” and sees the possibility of a smaller rate hike at the July meeting, particularly in response to rising borrowing costs in the US housing market. In the midst of a recession and higher prices.
“We cannot stress enough that housing data is not down yet, and we suspect policymakers have the stomach” to continue raising large rates, he said.
But others said the Fed is ready to do whatever it wants to rein in price hikes.
“The Fed is focused on derailing inflation…they know it’s going to need heavy lifting and some ‘pain,'” Grant Thornton’s chief economist Diane Swonk said on Twitter.
While Fed officials say the world’s largest economy is in a solid state, they cautioned that the outlook is highly uncertain.
Russia’s invasion of Ukraine and the COVID-19 lockdown in China “increased risks to both the United States and economies around the world,” including worsening supply chains and fanning the flames of inflation, particularly of energy and other commodities. Prices, Minutes said. ,
“Supply constraints were still significant and may take some time to resolve,” he said.
The current target is for the benchmark rate to be sharply neutral, where it is neither stimulating nor restricting the economy; However, officials said, “a restrictive stance of the policy may be appropriate.”