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Fed minutes show ‘significant majority’ in favor of slower rate hikes


A “significant majority” of Fed officials believe it will soon be time to slow the central bank’s current rate of interest rate hikes.

Minutes from the Federal Reserve’s policy meeting earlier this month Wednesday’s release shows central bank sign is set to move from its campaign increase interest rates by 0.75% at the policy meeting next month.

“Several participants observed that, when monetary policy approached a sufficiently restrictive stance to achieve the Committee’s goals, slowing the rate of increase within the target range for the fund rate federal is appropriate,” the minutes showed.

“Additionally, the majority of participants judged that a slowdown in growth could soon be appropriate.”

The minutes showed that although the pace of rate hikes may be slowing, the ultimate extent to which the Fed raises rates in the current cycle may have increased in recent months.

Federal Reserve Board Chairman Jerome Powell speaks during a news conference after the Federal Open Market Committee's two-day closed-door meeting on interest rate policy in Washington, U.S., November 2, 2022. REUTERS/Elizabeth Frantz

Federal Reserve Board Chairman Jerome Powell speaks during a news conference after the Federal Open Market Committee’s two-day closed-door meeting on interest rate policy in Washington, U.S., November 2, 2022. REUTERS/Elizabeth Frantz

Officials note that persistent inflation suggests interest rates are likely to stabilize at “slightly higher than previously expected.”

After the publication of these minutes, Stocks push higher on Wednesday afternoon.

In the minutes, officials noted that with policy rates approaching a “full-limited” stance, the final degree to which the Fed raises rates becomes more important than the pace at which rates are raised.

“Participants agreed that communicating this difference to the public was important to reinforce the Commission’s strong commitment to bringing inflation back to the 2% target,” according to the minutes.

Some participants also felt that further rapid policy tightening increases the risk of instability or order in the financial system.

While the new focus is on how high the Fed will raise interest rates, many participants feel that there is considerable uncertainty about the final level of the federal funds rate needed to bring inflation back to level 2. %.

Officials feel that it is a deliberate shift to a more restrictive policy stance than prudent risk management due to high inflation and upside risk. Members commented that recent data on inflation provide little indication that inflationary pressures are easing.

The minutes echoed comments made by Fed Chair Powell in his post-meeting news conference earlier this month. Fed Chair Powell laid the groundwork for the start of a pace of rate hikes at the central bank’s most recent policy meeting, but said the question of when to scale up the hike was unimportant. by how much the central bank will eventually raise interest rates to tame inflation.

Powell said interest rates will now need to move higher than forecast until the Fed reaches “restrictive enough”. Rate forecasts from the Fed’s policy meeting in September estimate rates will peak at 4.6% next year. The Fed will release new projections at its December policy meeting.

In early November, the Fed raised interest rates by 75 basis points for the fourth consecutive meeting to 3.75% to 4%, bringing rates to their highest level since late 2007.

Markets are pricing in 50 basis points for the December meeting.

Fed Governor Christopher Waller said last week recent inflation data made him more comfortable with the idea of ​​raising rates by 50 basis points at the central bank’s December meeting.

Cleveland Fed President Loretta Mester echoes Waller’s comments in an interview this weeksaid the Fed could “slow down” from its current rate of rate hikes at its December meeting.

Even so, some members of the Fed still leave 75 basis points on the table. San Francisco Fed President Mary Daly said on Monday it is too early to make another 75 basis point rate hike off the table if the upcoming inflation reports get hot.

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