Most Fed Officials Back Slower Rate Hikes to Control Inflation

The Fed has implemented six adjustments to its key rate so far this year, the last four of 0.75% each, as a strategy to control inflation.

Photo: MANDEL NGAN/Getty Images

The Federal Reserve (Fed) is preparing to announce a new adjustment to its base interest rate as part of its strategy to control inflation; however, most central bank officials think that that increase should be less.

Since inflation began to climb this year, the Fed has applied six adjustments to its key rate, the latest of which four have been historical adjustments of 0.75%.

These increases have caused shocks in the markets that resent each movement that the Fed announces, since the reference rate is linked at the cost of commercial and consumer loans.

Although the Fed and its officials, beyond the board that discusses and approves the increases, consider that the adjustments to the reference rate should continue, there is also a consensus that they should be slower.

This is shown by the minutes of the November 1 and 2 meetings of the Fed officials, which were made public this week, after the last increase of 0.75% that the board approved.

Fed officials “saw very little sign that inflationary pressures were easing” and added that further adjustments “would be appropriate”.

Prior to the latest Fed announcement, markets were optimistic that would be the last three quarter point that the central bank would announce.

However, Fed Chairman Jerome Powell dashed those expectations by assuring, in a post-announcement press conference, that policymakers they were far from done with the hikes.

Despite this, in the minutes of previous meetings, several Fed officials believe that hikes should be less aggressive.

“Slowing down would give the (Fed) the ability to assess the economic outlook and see where they areJennifer Lee, a senior economist at BMO Capital Markets, said in a research report published by the agency. PA.

During the last Fed meeting, officials also expressed doubts about how long it might take for the Fed to return inflation to its 2% target through key rate hikes that slow inflation.

Last October, the Consumer Price Index (CPI) report showed that annual inflation during October stood at 7.7%, which showed a setback after several months in which the data did not fall below 8% in its measurements. annual.

Markets saw in this report some signs that inflation is finally giving way to the Fed’s actions and that this has started to send the signal to consumers that the economy is cooling.

However, there are still indicators that do not favor the Fed, such as the most recent employment report, which showed an unemployment rate of 3.7% and that the labor market remained vibrant last October, and with competitive wages.

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