Most Recent Fed Meeting Shows Possible Interest Rate Move This Year

Minutes from the most recent Fed meeting released yesterday show the Fed is now open to considering tapering the purchase of bonds as early as November, in a move to raise interest rates in response to surging prices.

Mandatory Credit: Photo by Al Drago/POOL/EPA-EFE/Shutterstock (12516775u)Jerome Powell, chairman of the U. © Al Drago/POOL/EPA-EFE/Shutterstock / Al Drago/POOL/EPA-EFE/Shutterstock Mandatory Credit: Photo by Al Drago/POOL/EPA-EFE/Shutterstock (12516775u)Jerome Powell, chairman of the U.

See: Consumer Price Index: Inflation Won’t Let Up – Food and Gas Prices Rise Again in September 

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Find: IMF Downgrades US Growth Forecast Citing Supply Chain Disruptions, Inflation

The Fed meeting summary revealed the tapering could include a reduction of $10 billion in Treasury bonds and $5 billion in mortgage-backed securities.

The announcement was somewhat unexpected as the Fed has largely maintained their belief that inflationary pressures are transitory and will begin to ease off as the effects of the pandemic do so as well. The members have now shifted their projections, citing rising COVID-19 cases enough to overwhelm a system already inundated by tight labor markets and surging prices.

“Most participants saw inflation risks as weighted to the upside because of concerns that supply disruptions and labor shortages might last longer and might have larger or more persistent effects on prices and wages than they currently assumed” the notes read, meaning that the Fed is now accepting that inflation might stick around longer than first expected.

Several participants in the Fed meeting even “indicated that they preferred to proceed with a more rapid moderation of purchases than described in the illustrative examples” meaning several Fed members felt it necessary to raise interest rates even sooner than the mid-November recommendation.


Video: Fed needs to start raising interest rates during 2022, says JPMorgan's Kelly (CNBC)

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