Home » Fed officials signal restrictive rates may be needed ‘for some time’

Fed officials signal restrictive rates may be needed ‘for some time’

by WorldFinance
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Federal Reserve officials discussed the need to keep interest rates at levels that restrict the economy “for some time” in a bid to contain the highest inflation in roughly 40 years, according to an account of their most recent meeting.

Minutes from the meeting, at which the US central bank raised its benchmark policy rate by 0.75 percentage points for the second month in a row, signalled policymakers were intent on pressing ahead with tightening monetary policy despite early signs the economy is cooling down.

Officials noted inflation had shown little sign of improving, according to the account of the gathering.

Given the enormity of the inflation problem and “upside risks” to the outlook for price growth, they backed raising interest rates to the point where they act as a drag on economic growth.

That “would better position the committee to raise the policy rate further, to appropriately restrictive levels, if inflation were to run higher than expected,” the minutes said.

Some officials indicated that “once the policy rate had reached a sufficiently restrictive level, it likely would be appropriate to maintain that level for some time to ensure that inflation was firmly on a path back to 2 per cent”.

After July’s rate rise, the Fed is in the throes of its most aggressive cycle of monetary tightening since 1981. The rate increase was implemented just a day before new data showed the US economy contracting for a second consecutive quarter, a common marker of a recession.

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