Federal Reserve officials said in discussions earlier this month that the central bank would “not hesitate” to take appropriate action to address inflationary pressures that pose risks to the economy.
WASHINGTON – Federal Reserve officials said in discussions earlier this month that the central bank would “not hesitate” to take appropriate action to address inflationary pressures that pose risks to the economy.
In minutes released Wednesday of the Fed’s November 2-3 meeting, Fed officials said the spike in inflation seen this year was still likely to be temporary, while acknowledging that the rise in prices was higher than expected.
The minutes covered a meeting in which the Fed voted to take the first steps to withdraw the massive support it provided to an economy that was pushed into recession last year after a sweeping lockdown to contain the COVID virus.
At its November meeting, the Fed approved cuts in the amount of Treasury bonds and mortgage-backed securities it was buying to put pressure on longer-term interest rates.
The committee approved cuts of $15 billion in November and $15 billion in December to $120 billion in monthly purchases of Treasury bonds and mortgage-backed securities. These monthly reductions were expected to continue until the bond purchase program was terminated by the middle of next year.
Inflation in recent months has reached levels not seen in decades. Fed Chairman Jerome Powell and other Fed officials have argued that price pressures were likely to be transient and go away once problems such as supply chain bottlenecks are resolved.
But Fed minutes showed a growing concern that unwanted price pressure could be prolonged and that the Fed should be prepared to reduce bond purchases more quickly or lower the Fed’s benchmark interest rate as soon as possible to ensure should start increasing so that inflation does not happen. out of hand.
Various participants noted that the Committee should be prepared to adjust the pace of asset purchases and to raise the target range for the federal funds rate higher than currently projected participants if inflation is in line with the Committee’s objectives. continued to exceed levels,” Minutes said.
The Fed’s policy rate was cut in the spring of 2020 to a record low of 0.25% from 0% as the Fed focused its efforts on keeping the COVID-19 crisis from spiraling into a deep recession.
The Fed will next meet on December 14-15, and some private economists said the central bank may decide to send a stronger signal at that time of the Fed’s intentions to address the economy’s surge in inflation.