Not only did policymakers see the need to increase benchmark borrowing rates by 50 points, but they also said similar hikes likely would be necessary at the next several meetings
Federal Reserve officials earlier this month stressed the need to raise interest rates quickly and possibly more than markets anticipate to tackle a burgeoning inflation problem, minutes from their meeting released Wednesday showed.
Not only did policymakers see the need to increase benchmark borrowing rates by 50 points, but they also said similar hikes likely would be necessary at the next several meetings.
They further noted that policy may have to move past a “neutral” stance in which it is neither supportive nor restrictive of growth, an important consideration for central bankers that could echo through the economy.
Most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings, the minutes said. In addition, Federal Open Market Committee members indicated that ‘a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook.’
The May 3-4 session saw the rate-setting FOMC approve a half percentage point hike and lay out a plan, starting in June, to reduce the central bank’s $9 trillion balance sheet consisting mostly of Treasurys and mortgage-backed securities.
That was the biggest rate increase in 22 years and came as the Fed is trying to pull down inflation running at a 40-year high.
Market pricing currently sees the Fed moving to a policy rate around 2.5%-2.75% by the end of the year, which would be consistent with where many central bankers view a neutral rate. Statements in the minutes, though, indicate that the committee is prepared to go beyond there.
All participants reaffirmed their strong commitment and determination to take the measures necessary to restore price stability, the meeting summary stated.
To this end, participants agreed that the Committee should expeditiously move the stance of monetary policy toward a neutral posture, through both increases in the target range for the federal funds rate and reductions in the size of the Federal Reserve’s balance sheet, it continued.
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