Federal Reserve officials are considering whether they will need to raise interest rates again to cool the economy and ensure that rapidly rising inflation will subside completely, and minutes of their meeting The outlines of that debate were presented earlier this month.
According to the central bank’s October 31–November minutes, “Participants noted that further tightening of monetary policy would be appropriate if incoming information indicated that progress toward the Committee’s inflation objective was inadequate.” 1 meeting, which was released on Tuesday.
Fed officials thought that “data coming in the coming months will help to clarify the extent to which the deflation process was continuing.”
Central bankers voted to leave interest rates unchanged at their meeting earlier this month in a range of 5.25 to 5.5 percent, giving them more time to assess whether their substantial rate steps so far are meeting demand. Making an impact.
Wall Street is focused on what executives will do next. Fed policymakers predicted another rate change in 2023 in their September economic projections, but investors see little chance they will keep rates unchanged at their final meeting of the year on Dec. 12-13. Will increase. Tuesday’s minutes may serve to reinforce expectations of an extended pause, as they suggested officials planned to see how the economy shapes up over the course of “months.”
Fed watchers are now trying to figure out whether officials have decisively raised interest rates and, if so, when they might start cutting them. Policymakers will publish a new set of quarterly economic forecasts at the conclusion of their December meeting. They, along with comments from Fed Chairman Jerome H. Powell, could provide important clues about the future.
As of September, policymakers were expected to lower rates before the end of 2024. If this forecast holds true and Mr. Powell signals that policymakers are not eager to raise rates again, investors may focus their attention on how soon rates are cut. At the moment, market pricing suggests that Wall Street expects policymakers to start lowering interest rates at some point first half of 2024,
But if Fed officials use the December economic projections to predict that rates could remain high for a longer period of time – or if Mr Powell suggests that rate increases will remain on strength next year – then it will at least At least the possibility of more action can be kept alive. Several central bankers have made clear in recent weeks that they are not sure whether they should raise interest rates.
“I would not take additional tightening off the table,” Susan Collins, president of the Federal Reserve Bank of Boston, said in an interview on CNBC last week.
Minutes from the Fed’s November meeting revealed how policymakers are thinking about the outlook. While officials wanted to make sure they were cooling the economy enough to ensure that inflation would return to their 2 percent target on time, they did so by raising rates too high and risking a painful recession. Also wanted to avoid doing it.
Fed officials thought that “with the monetary policy stance in the accommodative zone, the risks to the achievement of the Committee’s goals have become more two-sided,” the minutes said, although “most participants continued to see risks to the upside for inflation.” “
Consumer price index inflation fell to 3.2 percent in October, down from a peak above 9 percent in the summer of 2022. Still, officials worry that getting inflation back to normal levels may prove difficult.
Fed officials define their inflation target using a separate but related measure, the personal consumption expenditure index, which comes out with a greater delay. October PCE figures are set for release On 30th November.
Fed officials are keeping a careful eye on the strength in the job market and economy as they try to gauge whether inflation is likely to get fully under control. If the economy remains under too much pressure — consumers are spending freely and businesses have laid off workers — companies may continue to raise prices faster than usual.
Since their last meeting, the Fed has had some positive news on that front. While employers continued hiring in October, they did so at a much slower pace: They hired only 150,000 workers, and earlier hiring figures were downwardly revised.
The minutes suggested that policymakers were keeping an eye on signs that “labor markets are reaching a better balance between demand and supply.”