The Federal Reserve of the US considers that it will not be “appropriate” to cut the interest rates this year with a inflation which is still high, according to extracts from the minutes of their last meeting published this Wednesday.
“No (meeting) participant anticipates that it may be appropriate to begin cutting interest rates in 2023,” said these documents, released a few weeks after the meeting in which the Fed raised its benchmark rates by half a percentage point, to 4.25-4.50%.
In minutes from their mid-December meeting released Wednesday, officials also stressed that a slowdown in their rate increases, from four consecutive three-quarter-point increases to one half-point increase, “was not an indication of any weakening” in his determination to reduce inflation to its target of 2%.
The smaller increase also did not indicate “a judgment that inflation was already on a persistent downward path.” Instead, risks persisted that inflation could remain higher than expected, the officials said.
That message reflected concern that operators of Wall Street they were overly optimistic that the Fed would soon suspend its rate hikes and even cut them later this year, according to the minutes. Such a “misperception,” the minutes indicated, would complicate the Fed’s campaign to reduce inflation. This would occur if bullish traders pushed stocks higher and bond yields lower, counteracting the Federal Reserve’s efforts to cool the economy.
Overall, the minutes showed that Fed officials were still determined to keep rates high to quell inflation and were not very comfortable with inflation falling from a peak of 9.1% in June to 7.1% in November. The hawkish message sent the stock market tumbling after the Fed announced its latest rate hike and he projected more hikes this year than expected.
At a press conference after last month’s meeting, Fed Chairman Jerome Powell, He acknowledged that inflation had moderated in October and November. But he stressed that “substantially more evidence” of declining inflation would be needed for the Fed to halt its rate hikes.
“We have a long way to go,” Powell said last month, “to get to price stability.”
Higher Fed rates have increased the costs of mortgagesthe auto loans and other commercial and consumer loans.
In a set of quarterly economic projections they issued after the December 14 meeting, officials said they expected to raise their benchmark rate to a range of 5% to 5.25% and keep it there through the end of the year. That was a quarter point higher than financial markets had expected.
Policymakers also forecast inflation to end this year higher than they had projected in September, despite signs that price increases have slowed in recent months. Officials projected that inflation, by their preferred measure, would be 3.1% by the end of this year, versus 2.8% in its September estimates.
The Fed’s 19 policymakers banded together to project a higher rate this year, with 17 forecasting a rate of at least 5% to 5.25% and just two slightly below.
Many economists have warned that the central bank’s aggressive rate hikes will plunge the economy into recession this year. Fed officials predicted last month that the unemployment rate would rise to 4.6% this year from the current 3.7%a pace that has generally coincided with a recession.
However, so far, the labor market has remained resilient. On Wednesday, the government reported that the number of jobs available in November remained near the previous month’s high level, a sign that companies are still determined to hire despite 18 months of high inflation and rising interest rates. .
Also on Wednesday Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said he supported raising the Fed rate to around 5.25% to 5.5%. That’s higher than most of his peers favor and a full notch above his current level.
(With information from AFP and AP)