“A slower pace of rate increases should allow the Committee to better assess progress” in the fight against inflation, while preserving employment, indicate the minutes of the last meeting.
A majority of US Federal Reserve (Fed) Monetary Committee members believe a slowdown in rate hikes will be “appropriate soon,” according to minutes from the last Fed meeting held Nov. 1-2, released Wednesday .
“A slower pace of rate hikes should allow the Committee to better assess progress” in the fight against inflation, while preserving the labor market, according to these “minutes” from the Fed.
“A substantial majority of participants believe that slowing the pace of rate hikes may soon be appropriate,” the US central bank said in its minutes.
In early November, the Fed raised overnight interest rates for the fourth consecutive time by three-quarters of a percentage point (0.75%) to between 3.75% and 4%.
These federal funds rates affect all other lending in the United States, and their increase has clearly weakened the housing market by making mortgage loans more expensive.
For the next Fed meeting, scheduled for December 13-14, the markets were already largely convinced to 75%, before the publication of the “minutes”, that the central bank will raise interest rates by only 50 basis points, according to the calculations by CME on futures markets.
Inflation has in fact begun to slow down slightly, to 7.7% over a year in October, according to the CPI index, against 8.2% in September.
But the members of the Monetary Committee (FOMC) remain determined to continue the work. “They continue to anticipate that rate hikes will continue until a sufficiently tight zone is reached to tame inflation,” according to the minutes.
However, they do not give any indication of what the “terminal level” of overnight rates might be, a level that “remains very uncertain”.
But some Committee members believe it is “higher than previously thought” because “inflation shows little sign of easing,” they say, despite the meeting being held a week before the latest CPI inflation index was released. which showed a slight slowdown in the increase in consumer prices.
A debate also seems to be emerging with “some participants” concerned that fares are being raised too much.
“There is a risk that the cumulative tightening of monetary policy will exceed what is needed to bring inflation down to 2%,” feared some members. They “observed that the rapid continuation of monetary tightening increased the risks of instability and dislocation of the financial system”.
Wall Street, where trading was very low on Wednesday, on the eve of Thanksgiving which increases volatility, reacted rather positively to the publication of the “minutes”, the indices registering a slight rise in green.
