Fed minutes: Further rate increases anticipated

Federal Open Market Committee members anticipate that further increases in the federal funds rate will be necessary to bring down inflation to the committee’s 2% objective, according to minutes released today for the FOMC’s September meeting. At the meeting, the committee raised the rate by 75 basis points to 3% to 3.25%. The minutes did not indicate whether committee members anticipate that a similar hike will be needed when it meets again in early November, but noted that meeting participants believe the committee “needed to move to, and then maintain, a more restrictive policy stance.”

“Participants judged that the pace and extent of policy rate increases would continue to depend on the implications of incoming information for the outlook for economic activity and inflation and on risks to the outlook,” according to the minutes. “Several participants noted that, particularly in the current highly uncertain global economic and financial environment, it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook.”

Participants commented that recent inflation data generally had come in above expectations and was declining more slowly than they had anticipated, according to the minutes. They expected inflation pressures to persist in the near term, noting labor market tightness and the resulting upward pressure on nominal wages, continuing supply chain disruptions and the persistent nature of increases in services prices, particularly shelter prices. Read the minutes.