MNI: 'A Few' FOMC Members Sought 50BP Hike- Minutes

Almost all Federal Reserve officials agreed it was time to step down the pace of rate hikes to a quarter point at their Jan 31-Feb.1 meeting but "a few" wanted to hike by 50 basis points to get sufficiently restrictive more quickly, minutes from the gathering published Wednesday showed. 

There was no discussion of a pause in rate hikes despite hopes in financial markets that such deliberations had been in an integral part of the Fed's most recent meeting.

"Almost all participants agreed that it was appropriate to raise the target range for the federal funds rate 25 basis points at this meeting,” the report said. “A few participants stated that they favored raising the target range for the federal funds rate 50 basis points at this meeting or that they could have supported raising the target by that amount.”

Those who favored a 50 bp hike "noted that a larger increase would more quickly bring the target range close to the levels they believed would achieve a sufficiently restrictive stance.”

The Fed raised its official interest rate target range by a quarter percentage point to 4.50%-4.75%, reducing the size of the one-meeting rate increase from 2022's torrid pace. 

Since then, strong readings on jobs and inflation have raised market expectations for the terminal funds rate up to around 5.3%, some 40 basis points higher this month and above the Fed's December median estimate of 5.1%. The Fed is expected to hike rates another 25 basis points in March but a couple of Fed presidents have said a 50 basis point move should not be ruled out.

"A number of participants observed that a policy stance that proved to be insufficiently restrictive could halt recent progress in moderating inflationary pressures, leading inflation to remain above the committee’s 2% objective for a longer period, and pose a risk of inflation expectations becoming unanchored," the minutes said.

The economy created over half a million jobs in January, raising questions about how much impact Fed tightening is having over unusually tight employment conditions. 

CPI inflation eased last month but underlying signals pointed to persistence in many key sectors including services outside of housing, a strong emphasis of Fed Chair Jerome Powell. The headline consumer price index rose 6.4% while the core measure climbed 5.6%, the smallest 12-month rise since December 2021.