A “significant majority” of Federal Reserve officials favor an early slowing of rate hikes, even as some warn that monetary policy will need to be tighter than expected. next year, according to their most recent meeting report.
Minutes of the November meeting, where the Fed lift up Its benchmark rate rose 0.75 percentage points for the fourth time in a row, showing officials’ continued commitment to their campaign to quell rising inflation.
However, the account also signals that officials are prepared to start raising rates with smaller increments as they assess the economic impact of the most aggressive tightening campaign in decades.
“The slower pace in these cases will allow the committee to assess progress toward the goals of maximum employment and price stability,” the minutes said.
The report, released on Wednesday, shows that some Fed officials believe they will have to squeeze the economy harder than initially expected as inflation shows “little sign of abating” – even if they get there with a smaller rate hike.
After the most recent rate decision, the federal funds rate now hovers between 3.75% and 4%, a level that top officials say will begin to more directly limit demand and dampen demand. consumer spending.
Because rate hikes take time to feed the economy, Fed policymakers have offer Rates “decelerated” to half a point shortly after their next meeting in December, when their monetary policy tightening campaign will enter a tense period. new stage.
At a press conference earlier this month, chairman Jay Powell said the top-rated fund rate would surpass the 4.6 percent that most Fed officials expected just a few months ago. .
His warning of a higher “terminal settlement ratio” comes amid growing evidence that price pressures are increasing for a wider range of goods and services even. when the rate of increase in consumer prices appease.
Since then, many policymakers have said the federal funds rate would need to rise at least above 5% to bring inflation back to the Fed’s 2% target. They have also pledged to keep interest rates at what they consider “restrictive enough” for an extended period of time until they believe the economy is starting to cool as expected.
However, investors continue to be skeptical of the Fed’s commitment to push for monetary tightening, especially as economic data becomes increasingly mixed. Despite objections from Fed officials, market participants widely expect that the central bank will cut interest rates next year as the US economy slips into recession.