Officials from the Federal Reserve voiced concern about inflation at their meeting earlier this month. They suggested there might be a hike in interest rates if prices continue to rise.
The Fed’s interest-rate-setting Committee revealed minutes from its November meeting on Wednesday. In this meeting, Fed first hinted that it would be scaling back all the economic assistance provided during the epidemic. According to the meeting report, there was a robust discussion regarding inflation. Members emphasized their preparedness to act if conditions worsen. Various participants noted that if inflation continued to run higher than levels consistent with the Committee’s objectives, the Committee should be prepared to adjust the pace of asset purchases. The Committee mentioned that they should also raise the target range for the federal funds rate sooner than participants currently expected.
Officials emphasized the importance of taking a “patient” attitude to incoming data. The incoming data shows the inflation rate at its highest level in more than 30 years. They also say that they would “not hesitate to take necessary steps to counter inflation pressures that presented dangers to its longer-term price stability and employment objectives.”
Fed’s decision on rate
The Federal Open Market Committee said on Nov. 3 that it would begin reducing its monthly bond-buying program. This program has seen purchase at least $120 billion in Treasurys and mortgage-backed securities during the previous two days. The program aims to keep money flowing in certain areas while keeping broad interest rates low to stimulate economic activity.
The FOMC indicated in its post-meeting statement that “significant further improvement” in the economy would allow it to reduce purchases by $15 billion per month. Including $10 billion in Treasurys and $5 billion in MBS. According to the statement, the timetable would last at least through December. It would most likely continue until the termination of the program. That is in late spring or early summer 2022.
Some FOMC members sought an even quicker pace to give the Fed more discretion to hike rates sooner, according to the minutes.” Some participants noted that slowing the pace of net asset purchases by more than $15 billion per month could be required so that the Committee would be in a stronger position to alter the federal funds rate target range, particularly in light of inflation concerns,” according to the minutes.