Meeting Minutes Show Fed’s Determination to Tackle Inflation

Federal Reserve meeting minutes from last month have revealed the extent of the US central bank’s determination to tame inflation, with officials warning investors to expect interest rates to be kept high for some time. 

Before the meeting, markets expected interest rate cuts to start in the second half of 2023. However, Fed officials have warned against “unwarranted easing in financial conditions.” US stocks lost minor gains upon the release of the report. The Fed’s sensitive two-year treasury yield climbed slightly, while the dollar stayed lower.

US policymakers had hiked the benchmark interest rate by 50 basis points in December, pressing the brakes slightly after an aggressive series of four consecutive 75-basis-point increases. Starting from near zero in March, officials raised the benchmark lending rate through successive meetings to a target range of 4.25% to 4.5%, the highest since 2007.

The meeting minutes showed that officials were prepared to continue to be hawkish, with additional hikes projected for 2023 if required.

The minutes showed Fed officials were intent on dragging inflation back to their 2% target at the risk of rising unemployment and slower GDP growth. Chair Jerome Powell had said at a post-meeting press conference that the committee had more work to do as labor markets were “extremely tight” and needed to be softened.

At the meeting, 17 of 19 Fed officials projected interest rates at or above 5.1% this year. By comparison, not a single Fed official in September had forecast rates above 5% in 2023.