Federal Open Market Committee Minutes
On February 1st The FOMC raised the benchmark rate 25bps. The FOMC minutes released today shows, during the meeting, the participants generally observed that the inflation outlook continued to pose upside risks and was a crucial factor in shaping the policy outlook. They believed that interest rates would need to increase and remain elevated “until inflation is clearly on a path to 2%.”
Only a few participants expressed outright support for a larger half-percentage-point increase at the meeting or indicated that they “could have supported” such an increase.
The Breakdown, what were they thinking?
The minutes indicated that the Fed was working towards a possible conclusion to its current rate increases, both by slowing down the pace to more cautiously approach a possible stopping point and by leaving open the possibility of how high rates could ultimately rise if inflation does not slow.
Throughout a year in which the inflation rate soared to a 40-year high. The Fed worked to catch up by raising its policy rate over eight meetings, starting from a near-zero level in March of the previous year to the current range of 4.50%-4.75%.
The policy statement released on Feb. 1 stated that “ongoing increases” would still be necessary, but the focus had shifted from the pace of future rate hikes to their “extent.” This change acknowledged the belief among policymakers that they may be approaching a rate that is sufficient to make further progress in reducing inflation.