That’s what the Fed said at today’s meeting
2023.01.04 14:27
That’s what the Fed said at today’s meeting
Budrigannews.com – According to the minutes of the Fed’s December meeting, which were made public on Wednesday, policymakers agreed that “unacceptably high” inflation would require a prolonged period of restrictive policy.
According to the Fed’s minutes, “Participants generally observed that maintaining a restrictive policy stance for a sustained period until inflation is clearly on a path toward 2% is appropriate from a risk-management perspective.”
The Federal Open Market Committee raised its benchmark by 0.5% on December 14 to a range of 4.25 percent to 4.5 percent.
Members believed that a regime with higher rates for longer periods of time would limit economic expansion and reduce inflation, which remained “unacceptably high.”
The four consecutive 0.75 percent rate increases that were observed at the previous meetings were slowed by the Fed’s policy decision in December. Fed members at the meeting backed the need to raise interest rates further, upgrading their forecast on the peak level of rates, or the terminal rate, despite their willingness to move at a slower pace.
The Fed members estimated a median rate of 5.1% in 2023, up from a previous forecast of 4.6%, indicating a target range of 5%-5.25 percent, or approximately 75 basis points of future rate increases.
The Fed’s more aggressive rate-hike outlook came as members were getting ready for even faster inflation. They now expect price pressures to be 3.5 percent in 2023, up from 3.1 percent previously.
Neel Kashkari, president of the Minneapolis Federal Reserve, stated earlier on Wednesday that despite signs of easing inflation, the Fed still has work to do.
“[I]t will be proper to keep on raising rates basically at the following couple of gatherings until we are sure expansion has crested,” Kashkari said, determining a Took care of respite at around 5.4%.
Kashkari stated, “I have us pausing at 5.4%,” but he went on to say that “warrant, in my view, taking the policy rate potentially much higher” would occur if inflation remained elevated for an extended period of time.
The need for the Fed to keep tightening monetary policy was highlighted by the most recent data indicating that the labor market is still tight, posing a threat to wage growth and inflation.
The Bureau of Labor Statistics reports that U.S., a gauge of demand for labor, fell less than anticipated in November to 10.458 million from 10.512 million in October.
In a note, Jefferies stated, “The JOLTS report was very strong, showing no improvement in the labor imbalance.” “The Fed will not be comfortable pausing, let alone cutting rates, without a substantial reduction in labor demand.”
According to the minutes, Fed members expect labor market supply and demand to “come into better balance over time, easing upward pressures on nominal wages and prices” under an “appropriately restrictive path of monetary policy.” Investing.com’s Fed Rate Monitor Tool indicates that 84% of traders anticipate the Fed to raise rates by 0.25 percent at its next meeting on February 1.
Goldman Sachs stated in a recent note prior to the FOMC minutes, “We continue to expect three additional 25bp rate hikes in February, March, and May, for a peak funds rate of 5-5.25%.”
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