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Fed officials discussed removing policy support more quickly if inflation continues to accelerate.

Officials at the Federal Reserve expressed concern about inflation at their meeting in January, particularly as it has spread beyond pandemic-affected sectors to other regions and the global economy. Note that it is warranted to start shrinking their support for the economy faster than in the past. guess, a few minutes to meet Wednesday’s release shows.

Fed officials note that the labor market remains strong, although the Omicron wave of the coronavirus has exacerbated supply chain bottlenecks and labor shortages, and inflation continues to significantly exceed including the level imposed by the central ban.

Most officials still expect inflation to stay moderate throughout the year as pandemic-related supply bottlenecks ease and as the Fed removes some of its support for the economy. But some participants warned that inflation could continue to accelerate, pointing to factors such as rising wages and rents. If inflation does not fall as they expect, most Fed officials agree that they may need to quickly return to supporting the economy, although it may carry some risks.

The inflation outlook could worsen due to China’s zero-tolerance policy on Covid, which has led to widespread shutdowns that have forced factories to close; a clash in Ukraine could drive up global energy prices; or the spread of another variant, they said.

The central bank emphasized that the rate at which interest rates rise will depend on how the economy develops. But most officials agree that the Fed should take a faster approach to cool the economy down compared to 2015, when it began to raise interest rates at a slow and uncomfortable pace after the Great Recession.

“Most participants suggest that a faster rate of increase in the target range for the federal funds rate than in the period after 2015 is likely to be warranted, if the economy as a whole develops in line with committee expectations,” the minutes read.

Fed officials also agree that it is appropriate to proceed with the plan to cut nearly $9 trillion in securities held by the central bank. Most officials prefer to stick to a schedule announced in December that will conclude such purchases starting next month, although some consider an earlier end of the program to be warranted, and is a way to signal that they are taking a stronger stance against inflation.

Policymakers said the labor market had made “significant progress in recovering from the pandemic-related recession and is by most measures currently very strong”.

The January meeting reinforced what the market had been predicting: That the Fed was on track to raise rates in March. The question now is how quickly – and by how much – will the rate rise. Many investors have speculated that the Fed may raise rates by half a percentage point in March, instead of the usual quarterly increases.

In one statement After a two-day policy meeting in January, Fed officials laid the groundwork for higher borrowing costs “soon.” Jerome H. Powell, the Fed chair, said at a news conference after the meeting that “I would say that the committee intends to raise the federal funds rate at its March meeting, assuming that the conditions are right. To do that. ”

Inflation has continued to heat up since the last Fed meeting, and wage growth has remained strong. A key inflation measure released last week shows that prices escalate at the fastest rate in 40 years and extending beyond pandemic-affected goods and services, a sign that rapid increases may be longer lasting and hard to change.

The January consumer price index showed prices rose 7.5% year-on-year and 0.6% month-on-month, beating forecasts. A separate measure of inflation that the Fed prefers It also shows that prices will continue to stay high into late 2021. Overall, prices have risen at their fastest rate since 1982.

Wall Street is now predicting that interest rates could rise more than 1.75 percent at the end of the year, up from near zero today. The market started betting on a double the rate after January’s inflation data was surprisingly strong. But some Fed officials have soften those expectationssay they need a steady approach.

Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said Sunday that the Fed needs to move but its approach must be “measured.”

“I see that it is clear that we need to pull some accommodation out of the economy,” Ms. Daly said.Facing the nation. “But history tells us with Fed policy that sudden and aggressive action can really be destabilizing to the growth and price stability we’re trying to achieve.”

https://www.nytimes.com/2022/02/16/business/economy/fed-january-meeting-minutes.html Fed officials discussed removing policy support more quickly if inflation continues to accelerate.

Fry Electronics Team

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