WASHINGTON (Reuters) – A “substantial majority” of members of the U.S. Federal Reserve’s (FOMC) monetary policy committee said at the November 1-2 meeting that it would “probably soon” be appropriate to slow the pace of rate hike by the central bank, shows the minutes of the discussions published on Wednesday.
The Fed raised its main interest rate by three-quarters of a point after the meeting in order to curb inflation, but suggested that future increases in the cost of credit could take place at a slower pace.
“A slower pace (…) would allow the FOMC (Federal Open Market Committee) to better assess progress towards its objectives of full employment and price stability”, can we read in these “minutes”.
“Uncertainty about the lags and magnitude of the effects of monetary policy actions on economic activity and inflation were among the reasons cited,” the statement added.
The minutes also point to an emerging debate within the Fed over the risks that a rapid tightening of monetary policy could pose to economic growth and financial stability, although FOMC members acknowledge that they have seen little tangible progress on inflation and that rates need to rise further.
While “a few participants” felt that a slower rate hike could reduce risks to the financial system, “a few other participants” noted that any slowdown in rate hike policy would have to wait “for more concrete signs of ‘a significant reduction in inflationary pressures’.
Markets are pricing in a half percentage point rate hike after the next FOMC meeting on December 13-14.
(Report Howard Schneider, French version Jean-Stéphane Brosse)
Copyright © 2022 Thomson Reuters