With Inflation Persisting, Fed Signals More Rate Hikes Likely

Federal Reserve officials stated at their recent meeting that they will need to increase interest rates this year to keep inflation below 2%. Many support a slower pace. 

Minutes from Wednesday’s U.S. central banking meeting Jan. 31-Feb. 1, released by the U.S. Central Bank, showed that policymakers are concerned an “insufficiently restrictive” A policy stance could “stop recent progress in moderating Inflationary pressures” and to maintain consumer prices high for a longer period.

“Participants observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2%, which was likely to take some time,” The meeting minutes were published.

After the release, stocks ended the session mixed. 

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The meeting was attended by officials who voted The benchmark interest rate was raised by 25% to 4.5% to 4.75%. It was signaled that it would be increased. “couple more” This year, increases are possible. Following a one-half-point increase at the December meeting, and four consecutive 75 base-point moves prior to that, this was their latest move. 

The decision was unanimous. “almost all participants” To better evaluate the economic effects of rapid tightening, it was agreed that it was appropriate for rates to be raised by 25%. But “a few” Politicians favored a greater 50-basis-point increase. 

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“The participants favoring a 50-basis-point increase noted that a larger increase would more quickly bring the target range close to the levels they believed would achieve a sufficiently restrictive stance,” The minutes were spoken.

The market expects the Fed will continue to raise rates at a quarter point pace. However, there have been a number of more hot-than-expected economic reports in recent weeks. These include the Blowing January Jobs Report Inflation data showing disappointing results, pointing to high consumer prices’ pervasiveness, raised concerns about a higher peak rate and steeper rises. 

On February 10, the Labor Department reported that the Consumer price index The January inflation rate rose 0.5%, which is the highest in three months. The 6.4% annual inflation rate surprised everyone, too. 

Jerome Powell, Federal Reserve Chair (Olivier Doliery / AFP via Getty Images / File / Getty Images

Some traders have reexamined their expectations for rate hikes in the coming year due to this data. Number of investors The Fed may raise rates faster than expected, according to traders now. According to data from the, 58% of traders anticipate the Fed increasing the federal funds rate by another 75basis points. While 17% expect rates increase by a full percentage, FedWatch tool by CME Group. 

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Fed officials acknowledge that rates might need to go higher than they were expected and will remain high for a while longer. 

“My overall judgment is it will be a long battle against inflation, and we’ll probably have to continue to show inflation-fighting resolve as we go through 2023,” Last week, James Bullard, President of the St. Louis Fed, stated these words. “I wouldn’t rule anything out for that meeting or any meeting in the future.”

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