The latest meeting minutes released by the U.S. Federal Reserve show that officials plan to
raise interest rates quickly and possibly more aggressively than stock markets anticipate to
lower inflation.
The minutes show that central bank policymakers in the U.S. see the need to increase interest
rates by 50 basis points at the next several meetings this year.
They further noted that policy may have to move past a “neutral” stance in which it is neither
supportive nor restrictive of economic growth.
“Most participants judged that 50 basis point increases in the target range would likely be
appropriate at the next couple of meetings,” according to the meeting minutes.
The May 3 to 4 meeting saw the U.S. central bank raise its trendsetting interest rate by half a
percentage point and layout a plan, starting in June, to reduce the central bank’s $9 trillion U.S.
balance sheet consisting mostly of Treasuries and mortgage-backed securities.
That was the biggest rate increase in 22 years and came as the Fed is trying to pull down
inflation that is running at a 40-year high.
Market pricing currently sees the Fed moving to a policy rate around 2.5% to 2.75% by the end
of the year, which would be consistent with where many central bankers view a neutral rate.
Statements in the minutes, however, indicate that the committee is prepared to go beyond that
level if needed.
“All participants reaffirmed their strong commitment and determination to take the measures
necessary to restore price stability,” the meeting summary stated.
At his post-meeting news conference, Federal Reserve Chairman Jerome Powell took the
unusual step of addressing the American public directly to stress the central bank’s commitment
to taming inflation.
Last week, Powell said in a media interview that it would take “clear and convincing evidence”
that inflation was coming down to the Fed’s 2% target before the rate increases would stop.
