A slowdown of economic growth and the US job market will be “required” to bring down inflation, the Federal Reserve said in notes released Wednesday, adding that prices remain “unacceptably high.”
Fed officials also said inflation has “not yet responded” to increased interest rates, according to minutes of the US central bank’s September meeting, and that “a significant reduction in inflation would likely lag that of aggregate demand.”
In September, the Fed’s policy-setting Federal Open Market Committee (FOMC) increased the key interest rate by 0.75 percentage point for the third consecutive time, continuing its forceful action to tamp down inflation, which has surged to the highest level in 40 years.
On Tuesday, US President Joe Biden admitted there was a chance the country could suffer a “slight” recession, when asked about fears for the economy amid gloomy growth projections.
But some of the Fed officials cited in the minutes also noted that “it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook.”
Several of the officials added that “the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action.”
Participants also noted their strong “commitment to returning inflation to the committee’s two percent objective.”
The Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index, showed the annual pace of price increases slowed slightly in August.
Another measure of price increases, the CPI index, will be published Thursday morning for the month of September.
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