The minutes of the last meeting of the US Federal Reserve (Fed) revealed that interest rate hikes will continue until inflation falls significantly in the country and the pace of rate hikes will depend on incoming data.
The Fed released the minutes of the Federal Open Market Committee (FOMC) meeting held on July 26-27.
The minutes of the last meeting, where the policy rate was raised by 75 basis points to 2.25-2.50 percent, showed that interest rate hikes will continue until inflation drops significantly.
The minutes noted that the strength of the labor market may be stronger than current gross domestic product (GDP) data on economic activity suggest, raising the possibility of an upward revision to the GDP data.
“Supply bottlenecks continue to contribute to price pressures”
The minutes pointed out that Fed officials agreed that there is little evidence so far that inflationary pressures have eased, and noted that supply bottlenecks continue to contribute to price pressures.
The minutes emphasized that the slowdown in aggregate demand will play an important role in reducing inflationary pressures.
“With inflation remaining well above the Committee’s target, officials concluded that a shift to a restrictive policy stance was necessary to fulfill the Committee’s objectives of maximum employment and price stability,” the minutes said.
It was considered appropriate to slow down the pace of rate hikes at some point
The minutes noted that the pace of rate hikes and the extent of future policy tightening will depend on the impact of incoming data on the economic outlook and risks to the outlook.
“As the monetary policy stance tightens further, officials agreed that it would be appropriate to slow the pace of rate increases at some point as they assess the effects of cumulative policy adjustments on economic activity and inflation,” the Fed minutes said.
Inflation in the US, which hit a 41-year high of 9.1 percent in June, increased the pressure on the Fed.
Following the June meeting, the Fed raised the policy rate by 75 basis points at the July meeting and raised the federal funds rate to 2.25-2.50 percent.
Inflation in the US did not change on a monthly basis in July due to the recent decline in gasoline prices, while it increased below expectations with 8.5 percent on an annual basis.
The Fed’s next FOMC meeting is scheduled for September 20-21.
