Those responsible for the Federal Reserve of the USA claimed to be determined to curb inflation and a majority of them estimated at their last meeting, in early May, that several additional half-point interest rate hikes percentage will be “probably necessary”.
Half-point hikes, above the usual quarter-point hikes, will be “certainly appropriate in future meetings”according to extracts from the minutes of the last meeting, published this Wednesday.
The Fed decided to face an aggressive rate hike path in the face of the highest inflation in 40 years in the US
Fed officials want to “quickly bring monetary policy to a neutral path,” that neither stimulates nor slows down the economyand even, if necessary, adopt a tougher policy, which might weigh on growth.
All participants at the Federal Reserve monetary policy meeting held on May 3-4 supported a half-point hike in interest rates rate to combat inflation which, they agreed, had become a threat to the economy and was at risk of rising without central bank intervention, according to the minutes of the session.
It should be noted that the year-on-year rate of inflation in the United States moderated slightly in April to 8.3% -two tenths below that of March-, as reported by the Bureau of Labor Statistics, mainly due to a slight adjustment in international oil prices. However, US inflation stands at highest threshold in the last forty years.
The Federal Reserve promotes a monetary adjustment following observing solid levels of economic activity and employment
The 50 point rate hike this month’s basics was the first of that size in more than twenty years years and has put the Fed on the path of rapid monetary tightening, with “most policymakers” judging that further half-point hikes are “likely to be appropriate” at the June and July meetings, according to the minutes, which were released today. on Wednesday.
“All the participants agreed that the US economy was very strongthe job market was extremely tight and inflation was very high,” according to the minutes, with “upside” risks of even faster inflation given current global supply problems, ukrainian war and the continued lockdowns coronavirus in China.
In that context, “the participants agreed that the Committee (Federal Open Market or FOMC for its acronym in English) should quickly move the monetary policy stance towards a neutral stance (…) They also pointed out that a restrictive policy stance may become appropriate”.
Fed officials debate the best way to steer the economy toward lower inflation without causing a recession
“Many participants” judged that raising rates now “would leave the Committee in a good position to assess the effects of monetary policy tightening later in the year,” according to the minutes.
The minutes show the Fed dealing with the best way to steer the economy toward lower inflation without causing a recession or push the unemployment rate substantially higher, a task that “several participants” at this month’s meeting said would be challenging in the current environment.
“Several” Fed officials said the data had begun to indicate that inflation “might stop getting worse.” But even they agreed that it was “too early to be confident that inflation had peaked.”
KEEP READING: