ADDS DETAILS ABOUT DIFFERENT OPINIONS, ANALIST COMMENTS
The central bank said on Wednesday that most U.S. Federal Reserve policymakers felt a slower pace of rate hikes would be “appropriate soon.”
The Fed has taken an aggressive path to boost demand and cut prices as inflation in the world’s largest economy reached its highest level in decades, raising benchmark rates six times this year.
With inflation around 7.7 percent, the last policy meeting in early November raised interest rates for the fourth consecutive three-quarter point, a sharp rise.
This brings the rate to a range of 3.75 to 4 percent, the highest since January 2008.
But according to minutes of the November meeting released Wednesday, “a significant portion of participants decided that a reduction in the rate of growth would soon be appropriate.”
“Under these circumstances, a slower pace will enable the Committee to better assess progress towards its goals of maximum employment and price stability,” the minutes said.
Meeting participants noted that it would take some time for the full effects of the policy to be felt, and some noted that slowing the pace of rate hikes could reduce the risk of instability in the financial system.
In a sign of differing opinions, some warned that the effect of raising rates could be “more than necessary” to reduce inflation.
But policymakers meeting earlier this month agreed that inflation was “unacceptably high” and well above the long-term target of 2 percent.
Annual consumer inflation was 7.7 percent in October, down from a high of 9.1 percent in June, but still underscoring the rising cost of living.
With rising consumer prices showing “little sign of abating,” some officials felt the policy might need to be stricter than expected.
He added that a period of slower growth would help ease inflationary pressures.
Despite signs of slowing activity as Fed rate hikes swept through the economy, officials noted that the labor market remained tight with high wage growth.
New home sales also posted a surprise increase last month, while demand for major U.S. goods rose more than expected, data released Wednesday showed.
“Policymakers will slow the pace of rate hikes,” said Ryan Sweet, an economist at Oxford Economics.
But he said the Fed’s path to a soft landing is getting narrower, adding that economists on the Fed staff are “basically seeing the likelihood of a U.S. recession next year as a coin.”
A growing number of voices, including some Fed officials, are calling for smaller steps in the coming months.
Last week, Federal Reserve Governor Christopher Waller said signs of easing inflationary pressures and a slowing US economy could allow the central bank to scale back its pace of rate hikes.
Fed Vice Chairman Lael Brainard also said last week that it would be “soon appropriate” for the Fed to slow the pace of rate hikes, adding that it will take time for the economy’s flows to slow down that much.