U.S. Federal Reserve (Fed) officials at a meeting earlier this month concluded that a slowdown in the pace of rate hikes was immediately appropriate, with the central bank downshifting to a 50 basis point rate hike in December. suggested that there is a tendency to
“A majority of participants decided that a slowdown in the pace of growth was soon appropriate,” according to the minutes of the Nov. 1-2 meeting released in Washington on Wednesday.
At the same time, “various” officials concluded that “the final level of the federal funds rate needed to meet the Commission’s goals was somewhat higher than previously expected.”
US stocks and the Treasury rallied while the dollar fell following the report as investors received a dovish message from the minutes.
At the meeting, officials raised the benchmark interest rate by 75 basis points for the fourth consecutive time to 3.75-4%, extending the most aggressive tightening campaign since the 1980s to tackle inflation at its highest level in 40 years. did.
Officials debated the impact of delayed monetary policy and its impact on the economy and inflation, and how quickly cumulative tightening would begin to affect spending and employment. Many Fed officials have said that a slower pace of rate hikes would allow the central bank to gauge progress toward its goals.
“The uncertain delays and magnitudes associated with the impact of monetary policy actions on economic activity and inflation were among the reasons cited as why such an assessment was important,” the minutes said. .
In its policy statement, the Fed said rates would continue to rise to levels that were “sufficiently restrictive” given cumulative tightening and policy delays.
Chairman Jerome Powell explained in a post-meeting press conference that interest rates would end up higher than expected when officials submitted their forecasts in September, but the pace of rise will slow going forward. suggests.
Several officials have since favored a downshift to a 50 basis point increase when they meet next month. We expect rates to peak around 5% by mid-year.
Powell will have a chance to influence those expectations in his speech in Washington scheduled for November 30th.
Officials in September predicted it would reach 4.4% by the end of this year and 4.6% in 2023. They will update these quarterly forecasts at their December 13-14 meeting.
Economic data have shown moderate growth since the November data collection, with signs that inflation is slowing amid still-strong labor demand. Employers added 261,000 jobs last month and the unemployment rate rose slightly to his 3.7%, still very low by historical standards.
Financial conditions have eased since the interest rate hike in early November. The government’s 10-year bond yield fell about 30 basis points while the US stock market rose.