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Fed minutes show that most policymakers want to slow rate hikes ‘soon’

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  • Fed minutes showed that a majority of officials are in favor of slowing the pace of rate hikes.
  • He pointed out that the rapid growth has increased the risk of instability in the financial system.
  • The Fed is raising rates at a record pace to fight US inflation at its highest level in 40 years.

Minutes from the November Federal Reserve meeting showed that a majority of policymakers are in favor of slowing the pace of rate hikes “soon.”

According to the minutes, “a large majority of participants decided that a slower pace of growth would soon be appropriate,” adding that the slower pace would allow the Fed to assess progress toward its goals of maximum employment and price stability. will allow.

The minutes continued: “The uncertain slowdown and magnitude associated with the effects of monetary policy measures on economic activity and inflation were some of the reasons cited for why such an assessment was important.”

The Fed is aggressively raising interest rates to combat US inflation, which is at its highest level in 40 years. It has raised the benchmark rate by 75 basis points four times in a row, raising the Fed Funds rate to minus 4% as it seeks to bring inflation back to its target of 2%.

According to the minutes, some officials also warned that continued rapid monetary policy tightening increases the risk of instability or disorder in the financial system.

But more important than slowing the pace of rate hikes is the magnitude needed to reduce inflation, officials said.

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“With significantly restrictive monetary policy, participants stressed that the level to which the Committee eventually raised the target range for Federal Funds rates, and the subsequent evolution of policy, would be necessary to achieve the Committee’s objectives.” The main consideration had become the rate of further increase in target range,” the minutes said.

Meanwhile, others agreed it might be better to wait until rates were well into restrictive territory, with clearer signs of inflationary pressures easing significantly. Inflation rose 7.7% in October’s Consumer Price Index report, which was lower than economists had expected.

Discussions among officials mean that investors expect the Fed to raise rates by 50 basis points in December. That expectation hasn’t yet convinced market commentators like David Rosenberg that now is the time for “celebration.”

“Everyone is excited because the FOMC is going to slow down after a steady diet of 75 beepers? So going 50 basis points (and more!) into the most inverted yield curve since October 1981 is cause for celebration?” leading economist tweeted Wednesday,

Source: markets.businessinsider.com

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