The minutes of the Fed meeting show that if inflation continues to remain high, Fed members are ready to raise interest rates

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Federal Reserve Chairman Jerome Powell attends the House Financial Services Committee hearing on September 30, 2021, on Capitol Hill in Washington, USA.

Aldrago | Reuters

Fed officials expressed concerns about inflation at a meeting earlier this month and said they are willing to raise interest rates if prices continue to rise.

The committee that sets interest rates for the Fed released the minutes of its November meeting on Wednesday. In the minutes, it hinted for the first time that it might withdraw all economic help provided during the pandemic.

The meeting summary showed a lively discussion of inflation, and members emphasized that if the situation continues to heat up, they are willing to take action.

The minutes of the meeting pointed out: “A number of participants pointed out that if inflation continues to be higher than the level consistent with the committee’s goals, the committee should be prepared to adjust the pace of asset purchases and raise the target range of the federal funds rate earlier than participants currently expect.” .

Officials emphasized taking a “patient” approach to the upcoming data, which shows that the inflation rate has reached its highest level in more than 30 years.

But they also stated that they will “do not hesitate to take appropriate actions to deal with inflationary pressures that pose risks to their long-term price stability and employment goals.”

After a two-day meeting that ended on November 3, the Federal Open Market Committee stated that it would begin to reduce the monthly purchase of at least US$120 billion in US Treasury bonds and mortgage-backed securities.

The goal of the plan is to keep funds flowing in these markets while keeping wider interest rates low to promote economic activity.

The Federal Open Market Committee stated in a post-meeting statement that “substantial further progress” in the economy would allow a monthly reduction of $15 billion in purchases-$10 billion in US Treasury bonds and $5 billion in MBS. The statement said that this pace will continue until at least December, and may continue to advance until the end of the plan-possibly in the late spring or early summer of 2022.

The minutes of the meeting pointed out that some FOMC members hope to provide the Fed with room to raise interest rates faster.

“Some participants suggested that it is reasonable to reduce the rate of net asset purchases by more than $15 billion per month so that the committee can better adjust the target range of the federal funds rate, especially under inflationary pressure,” the meeting minutes said. .

This is important because inflation has become more severe since the November meeting. In the previous cycle, the Fed raised interest rates to cool the economy, but officials said they are willing to keep inflation higher than normal in order to improve employment conditions.

However, the market expects the Fed to take a more aggressive approach. Contract traders who bet on the future of short-term interest rates said that the Fed will raise interest rates three times at 25 basis points in 2022, although the current official forecast is that there will be no more than one rate hike next year. However, these markets are highly volatile and may change rapidly based on signals from the Federal Reserve.

This is breaking news.Please check back here for updates.


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