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Free AccessMNI: Fed Officials See Slowdown in Hike Pace 'Soon' -Minutes
Fed officials at their November meeting supported slowing the pace of interest rate hikes "soon" to give them time to observe the effects of higher rates on the economy and inflation, according to the minutes of the meeting released Wednesday, signaling a 50 basis point increase was likely next month.
At the same time, the FOMC also stressed that rates are likely to peak at a level "somewhat higher" than they had earlier expected due to stronger-than-expected inflationary pressures.
"A substantial majority of participants judged that a slowing in the pace of increases would likely soon be appropriate," the minutes said.
But, "various participants noted that, with inflation showing little sign thus far of abating, and with supply and demand imbalances in the economy persisting, their assessment of the ultimate level of the federal funds rate that would be necessary to achieve the Committee's goals was somewhat higher than they had previously expected."
A slower pace would better allow the FOMC to assess progress toward its maximum employment and price stability goals, the minutes said. Financial conditions have tightened significantly but "it would take time for the full effects of monetary restraint to be realized," the minutes said.
"The uncertain lags and magnitudes associated with the effects of monetary policy actions on economic activity and inflation were among the reasons cited regarding why such an assessment was important."
Some officials said the risk of overtightening had risen, and a few officials thought slowing the pace of increases could reduce the risk of instability in the financial system, the minutes said.
"Some participants observed that there had been an increase in the risk that the cumulative policy restraint would exceed what was required to bring inflation back to 2%," the minutes said.
The Fed has hiked interest rates by 75 basis points for four straight meetings, including in November, to a 3.75%-4.0% target range.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.