The release of the details of the Fed’s meeting minutes..the transformation will happen and less interest is coming by Investing.com

The release of the details of the Fed’s meeting minutes..the transformation will happen and less interest is coming by Investing.com
The release of the details of the Fed’s meeting minutes..the transformation will happen and less interest is coming by Investing.com

© Reuters

Investing.com – Federal Reserve officials agreed earlier this month that should happen soon as they assess the impact of monetary policy (raising interest rates) on the economy, according to a report released Wednesday.

The summary of the meeting, which reflects statements made by several officials over the past several weeks, indicated a slight increase in interest rates in the upcoming meetings. Markets widely expect the Federal Open Market Committee that sets an increase in December to step down, after four consecutive hikes of 0.75 percentage point.

Despite hinting that smaller moves are ahead, officials said they still see little sign of inflation abating. However, some committee members expressed concern about risks to the financial system if the Fed continues to proceed at the same aggressive pace.

The minutes stated that “a large majority of the participants believed that slowing down the pace of increase would be appropriate in the near future.” “Legacies and uncertain volumes associated with the effects of monetary policy actions on economic activity and inflation were among the reasons cited for the importance of this assessment.”

The minutes indicated that small increases would give policy makers an opportunity to assess the impact of successive price increases.

The summary noted that some members noted that “slowing the pace of the increase could reduce the risk of instability in the financial system.” Others said they would like to wait to slow down. Officials said they see the balance of risks to the economy now tilting to the downside.

Markets have been looking for clues not only about what the next rate hike might look like but also how far policy makers think they will have to go next year to make satisfactory progress against inflation.

It was important for the public to focus more on how far the Fed would go with rates, said officials at the meeting, “and the evolution of the policy stance thereafter has become more important considerations for achieving the committee’s goals than the pace of further increases in the target range.”

previous signals

In recent days, officials have spoken in unison about the need to continue fighting inflation, while also indicating that they can hold back on the level of interest rate hikes. This means that there is a strong possibility of a 0.5 percentage point increase in December, but the trajectory thereafter remains uncertain.

Markets expect a small increase in interest rates in 2023, which would bring the funds rate to around 5%, and then perhaps some cuts before the end of the year.

The post-meeting statement from the rate-setting Federal Open Market Committee added a sentence that was interpreted by markets as a signal that the Fed will make smaller hikes in the future. This sentence reads, “In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the delays with which monetary policy affects economic activity and inflation, and economic and financial developments.”

Investors saw this as a sign of a less intense rally after four consecutive increases of 0.75 percentage point lifted the Fed’s benchmark borrowing rate to a range of 3.75 to 4%, the highest in 14 years.

Several Fed officials have said in recent days that they expect a possible half-point move in December.

“They’re getting to a point where they don’t have to move so quickly. That’s helpful because they don’t know exactly how much tightening they’re going to have to do,” said Bill English, a former Fed official now at Yale School of Management. “They stress that the policy works with delays, so it helps to be able to move forward a little slower.”

Inflation is going down

Inflation data recently showed some encouraging signs with it remaining well above the central bank’s official target of 2%.

The October consumer price index rose 7.7% from a year ago, the lowest reading since January. However, a measure the Fed follows closely, the PCE excluding food and energy index, showed an annualized rise of 5.1% in September, up 0.2 percentage points from August and the highest reading since March.

These reports were released after the Federal Reserve meeting in November. Several officials said they viewed the reports positively, but needed to see more before they would consider easing policy tightening.

The Fed has been the target of some criticism recently that it may be tightening too much. The concern is that policymakers focus too much on lagging data and miss signs that inflation is ebbing and growth is slowing.

The article is in Arabic

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