Federal Reserve officials remain committed to raising interest rates further to quell soaring prices but agreed it would be appropriate to slow the pace of rate hikes “eventually,” the Federal Reserve said on Wednesday.
In the minutes of the July monetary policy meeting that led to a second massive 0.75 percentage point rate hike, Fed officials said it would take time for “unacceptably high” inflation to get back close to the 2% target be brought back.
However, many officials at the meeting warned there is a “risk” the Fed could go too far in trying to cut demand in a bid to lower prices, which are falling at the fastest pace in more than 40 years have risen.
The central bank has raised the benchmark interest rate four times this year, including two massive three-quarter-point hikes in June and July, after annual US inflation rose to 9.1 percent in June.
In the days since the last Fed meeting, financial markets have been heartened by comments from Federal Reserve Chair Jerome Powell signaling that rapid rate hikes would eventually slow.
But officials have tried to dispel some of that excessive optimism by emphasizing in recent speeches that the central bank is determined to continue its fight against inflation – a message echoed in the minutes.
– Signs of easing? –
There were some positive signs as consumer prices fell to 8.5 percent in July and soaring gas prices, exacerbated by the war in Ukraine, have eased in recent weeks.
Members of the Fed’s policy-making Federal Open Market Committee (FOMC) noted the recent fall in energy prices and some signs that supply constraints have eased.
But they said that falling oil prices are “unreliable” to bring headline inflation down and instead slowing demand will be a key factor in containing price pressures, the minutes said.
Some officials warned against “complacency”.
The central bank’s quick, aggressive moves are beginning to have an impact, and while officials say the U.S. economy should continue to expand in the second half of the year, “many expected economic activity growth to be at a below-trend pace,” the report said Protocol.
While the job market remains strong, many noted “some preliminary signs” that working conditions were beginning to ease.
As of last month, the world’s largest economy still had almost two job openings for every unemployed person in the labor force.
Meanwhile, despite high prices, American consumers have continued to spend, drawing on a stash of savings, despite data pointing to a shift toward services and away from cars and other high-priced items, while rising mortgage rates have begun to slow activity in the housing sector to slow down.
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