Restrictive Policy 'May Well Become Appropriate' - Fed Minutes

Fed officials said they should move "expeditiously" toward a neutral policy stance and "many" supported 50 bp increases for the fed funds target range at the next couple of meetings. Officials also noted that "a restrictive stance of policy may well become appropriate," according to the minutes of the May FOMC meeting released Wednesday after the usual three-week lag. 

• There was no active discussion of rate increases larger than 50 bps. 
• The labor market is "extremely tight" and many officials expect it to remain tight and wage pressures to stay elevated for some time. 
• Covid lockdowns in China could add to U.S. inflation. The staff economists marked up the 2022 PCE inflation forecast to 4.3%.
• Several officials noted the potential for unanticipated effects on financial market conditions from QT. Several commented on vulnerabilities of Treasury market liquidity and private sector intermediation capacity.