Members of the Federal Reserve indicated at their mid-December policy meeting that they were increasingly uneasy about high inflation, while envisioning an accelerated timetable for raising interest rates this year. This was revealed in the minutes of the Fed's latest policy meeting on Wednesday evening.
Most central bank officials foresee three rate hikes before 2022. In September, about half of officials still believed that rate hikes could wait until 2023. In general, participants noted that, given their individual outlook for the economy, the labour market and inflation, it may be justified to raise interest rates earlier or at a faster rate than they previously thought. The minutes also revealed growing concerns among participants that higher inflation could persist and force a more aggressive response from the Federal Reserve, especially as businesses and consumers increasingly begin to expect prices to fall quickly. continue to rise. For months, Fed executives maintained that the higher price pressures in 2021 were mainly caused by supply chain bottlenecks and would subside on their own. But Fed Chair Jerome Powell already said in the run-up to the meeting that he was much less convinced about this. Policy-making committee officials broadly shared his view. Their concerns were reflected in the decision to scale back or phase out bond purchases more quickly. The Fed wants to end this program before raising short-term interest rates to curb inflation. The earlier end of asset purchases - in March instead of June - opens the door for the US central bank to raise interest rates at its second scheduled meeting this year, in mid-March. The next Fed meeting is on January 25 and 26. The pace of decreasing monthly purchases has accelerated from the current $15 billion per month to $30 billion per month. The Fed noted that the pace could be adjusted where necessary. Some officials also believed the Federal Reserve should start shrinking its $8.76 trillion portfolio of bonds and other assets relatively soon once it has started raising interest rates. The federal funds rate remained at 0.00 to 0.25 percent as expected. The discount rate was maintained at 0.25 percent.
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