(MENAFN- Trend News Agency)
U.S. Federal Reserve officials believed that an increase of 50
or 75 basis points would likely be appropriate at the next meeting,
recognizing the possibility of an even more restrictive stance,
according to the minutes of the Fed's latest policy meeting,
Trend reports citing Xinhua .
'Participants noted that inflation remained much too high and
observed that it continued to run well above the committee's
longer-run 2 percent objective,' showed the minutes of the Federal
Open Market Committee's (FOMC) June 14-15 meeting.
Total personal consumption expenditures (PCE) prices - the Fed's
preferred measure of inflation - had risen 6.3 percent over the 12
months ending in April, while the 12-month change in the Consumer
Price Index (CPI) in May 'came in above expectations,' the minutes
The CPI skyrocketed 8.6 percent in May from a year earlier,
marking the third straight month of inflation over 8 percent and
hitting a new four-decade high, promoting Fed officials to make a
last-minute change at the June meeting after signaling a
50-basis-point rate hike for weeks.
The central bank raised its benchmark interest rate by 75 basis
points in June, marking the sharpest rate hike since 1994, and
taking the level of the federal funds rate to a range of 1.5 to
'Participants were concerned that the May CPI release indicated
that inflation pressures had yet to show signs of abating, and a
number of them saw it as solidifying the view that inflation would
be more persistent than they had previously anticipated,' the
Participants observed that some measures of inflation
expectations had moved up recently, the minutes added.
'Many participants judged that a significant risk now facing the
committee was that elevated inflation could become entrenched if
the public began to question the resolve of the committee to adjust
the stance of policy as warranted,' the minutes said.
The minutes showed that participants judged that an increase of
50 or 75 basis points would likely be appropriate at the next
meeting, leaving the door open for another 75-basis-point rate
At a press conference after the June meeting, Fed Chair Jerome
Powell noted that the 75 basis point increase was an unusually
large one, and 'I do not expect moves of this size to be common.' A
75 basis-point rise triples the usual move.
The committee would like to do a little more 'front-end
loading,' meaning the Fed would implement larger hikes early in its
rate hiking cycle, said Powell.
The Fed's latest quarterly economic projections showed that Fed
officials' median projection of PCE inflation is 5.2 percent in the
fourth quarter of this year, up from 4.3 percent in the March
projection. Median projection of PCE inflation falls to 2.6 percent
by 2023, and to 2.2 percent by 2024.
The economic projections also showed that the median FOMC
projection for the federal funds rate at the end of this year has
jumped to 3.4 percent, much higher than the 1.9 percent projected
in March. The median projection for 2023 year-end federal funds
rate is 3.8 percent.
'Participants concurred that the economic outlook warranted
moving to a restrictive stance of policy, and they recognized the
possibility that an even more restrictive stance could be
appropriate if elevated inflation pressures were to persist,' the
According to the minutes, a couple of Fed officials noted that
the gross domestic product (GDP) and gross domestic income had been
giving 'conflicting signals' recently regarding the pace of
economic growth, making it challenging to determine the economy's
'Most participants assessed that the risks to the outlook for
economic growth were skewed to the downside,' the minutes said.
Officials acknowledged that the Fed's monetary policy tightening
would likely slow down economic growth and push up unemployment,
the minutes noted.
'As the further firming in the policy stance would likely result
in some slowing in economic growth and tempering in labor market
conditions, members also agreed to remove the previous statement
language that had indicated an expectation that appropriate policy
would result in a return of inflation to 2 percent and a strong
labor market,' the minutes said.
A recession is 'inevitable' within the next 12 to 18 months,
former President of the Federal Reserve Bank of New York Bill
Dudley wrote in a recent Bloomberg opinion piece.
But a recession may come sooner. According to the Atlanta
Federal Reserve's GDPNow model updated last week, the U.S. GDP is
estimated to contract at a seasonally adjusted annual rate of 2.1
percent in the second quarter. With a first-quarter contraction, a
second consecutive quarter of negative growth would meet the
definition of a recession.
Legal Disclaimer: MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.