According to minutes of the latest monetary policy meeting released on Wednesday, US central bankers last month expressed concern that sky-high inflation could persist and reiterated their willingness to raise interest rates further to contain price pressures.
The Federal Reserve last month carried out its most aggressive rate hike in nearly 30 years as policymakers expressed concern that price pressures were slowing down, according to the minutes of its March 14-15 meeting. June showed no signs of relaxation.
Members of the Fed’s Open Market Monetary Policy Committee raised the reference rate by three-quarters of a point and said at the time another similar hike was possible later this month after data showed consumer prices rose 8.5 percent over the 12-month period had risen in May – the highest level in more than four decades.
Officials expressed concern “that inflationary pressures may not yet show signs of abating,” which some saw as further evidence “that inflation was going to be more stubborn than they previously expected,” the minutes said.
And many policymakers said there was “a significant risk … that elevated inflation could take hold if the public began to question the committee’s resolve”.
But the minutes make it clear officials are determined to continue their efforts to cool the economy through at least the end of the year.
With high prices for food, energy, homes and other goods putting pressure on American families, “Fed officials stressed that appropriate monetary tightening, coupled with clear and effective communication, is essential to restoring price stability.”
Nonetheless, the risk remains that inflation will accelerate further amid uncertainty over how long the impact of the Russian invasion of Ukraine and Covid-19 lockdowns in China will last, as these factors have exacerbated price pressures, it said it in the report.
Officials acknowledged they may need to become even more aggressive in tightening monetary policy “if elevated inflationary pressures persist.”
– Upside Risks –
Last month’s outrageous 0.75 percentage point hike put the Fed under intense pressure to stem rising prices that were struggling for millions of Americans to make ends meet and sending President Joe Biden’s approval ratings plummeting.
After the meeting, Fed Chair Jerome Powell said it was “essential” to bring inflation down but stressed the goal is to do so without derailing the US economy.
However, he acknowledged that there is always a risk of going too far, and fears of a US and global recession have sent global stock markets plummeting in recent weeks.
Biden has supported the Fed’s efforts and is hoping for success as his Democrats face an opportunity to lose control of Congress in the key midterm elections in November.
Federal Reserve officials began raising interest rates from zero in March as buoyant American consumer demand for homes, cars and other goods in parts of the world where Covid-19 remains challenging is compounded by transport and supply chain snarls collided.
That fueled inflation, which worsened dramatically after Russia invaded Ukraine in late February and Western nations imposed tough sanctions on Moscow, sending food and fuel prices skyrocketing.
This pushed US gasoline prices above $5.00 a gallon but have since declined slightly.
But the Fed minutes said inflation risks remain “on the upside”.
Officials said they will be “well positioned” later this year to assess the extent to which further rate hikes will be needed.
#Fed #Flags #Risk #Inflation #Firm #minutes
