Fed officials express concern over high inflation
federal Reserve Officials raised concerns last month about hotter-than-expected inflation and indicated that consumers may raise interest rates if prices continue to rise.
Although Fed policymakers in November left interest rates at the rock-bottom level where they have been sitting since March 2020, when COVID-19 forced an unprecedented shutdown of the country’s economy, they unanimously agreed with the Fed. Voted to begin gradually reducing $120 billion in monthly bond purchases. $15 billion in November and December. With this pace, the program will end by next June.
Fed to reduce bond purchases by $15BA a month until it breaks out of pandemic-era policy
But minutes from the November 2-3 meeting of the US central bank, released on Wednesday, show some policymakers are concerned that inflationary pressures are worsening and have indicated they will close to zero if prices continue to rise. Ready to hike rates. While officials insisted on a “patient” approach to the economic data to come, they also said they “do not hesitate to take appropriate action to address inflationary pressures, which are associated with its prolonged price stability and volatility.” create risk for employment purposes.”
Various participants noted that the Committee should be prepared to adjust the pace of asset purchases and raise the target range for the federal funds rate higher than currently projected participants if inflation continues to exceed levels consistent with the Committee’s objectives. , Minutes said.
New data released Wednesday morning shows personal consumption spending price index data – the Fed’s preferred inflation measure – rose 4.1% in October from the previous year, when excluding the more volatile measures of food and energy, at the fastest pace since January 1991. .
Speaking to reporters after the FOMC’s two-day meeting ended earlier this month, Chairman Jerome Powell declined to specify under what circumstances the Fed would need to accelerate its slim timeline or begin raising the federal funds rate. will inspire you to do so. However, the minutes noted that some participants believe that accelerating the reduction may be necessary in case the Fed needs to act to suppress rising inflation.
“Some participants suggested that the pace of net asset purchases by more than $15 billion each month could be reduced so that the committee would be in a better position to make adjustments to the target range for the federal funds rate, particularly in response to inflation. pressure in the light,” Minutes said.
Powell has said policymakers will end the tapering process, which is on track to end at the current pace in June, before interest rates rise above nearly zero.
But traders are currently looking at at least three rate hikes next year, with the latest inflation data likely to be released.
Powell – who was tapped by President Biden to lead the Fed for another four years – on Monday pledged to use the Fed’s full arsenal to prevent rapid inflation from becoming more permanent.
“We know that high inflation takes a toll on households, especially those who are not able to meet the high costs of essentials like food, housing and transportation,” he said. “We will use our tools to support the economy and labor market and prevent high inflation.”
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Still, Powell has said that price increases were driven by “supply and demand imbalances, bottlenecks and bursts of inflation” that were caused by “the continuing effects of the pandemic as well as the unprecedented reopening of the economy”. He has previously said that as the economy opens up and supply-chain disruptions end, the inflation jump will ease.
Fed officials will release their latest economic projections at their next policy-making meeting, which is scheduled for December 14-15.