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Minutes reveal reduced confidence among Fed officials regarding the necessity of further rate hikes

Fed officials less confident on the need for more rate hikes, minutes show

Fed officials less confident on the need for more rate hikes, minutes show

Federal Reserve officials are unsure whether they will need to increase interest rates again in the near future, minutes of the central bank’s policy-making meeting in May revealed. While all FOMC members at the meeting agreed on increasing the Fed’s benchmark rate by 0.25%, the minutes showed a mixed view on how policy should develop going forward, with some officials still advocating for further hikes while others thought a slowdown in economic growth would mean this was unnecessary. The minutes also noted concerns about the financial industry, with officials ready to use tools to ensure the banking system had sufficient liquidity to cover its needs.

Markets expect the May hike will prove to be the last of the current cycle, with the possibility of rate cuts later in 2023. However, many FOMC members have expressed scepticism that cuts will be necessary, with recent economic data showing inflation tracking lower but still significantly above the central bank’s targets.

FAQs

What happened at the Federal Reserve’s May policy-making meeting?

The Fed’s policy-making meeting in May saw all members agree to increase benchmark interest rates by 0.25%. However, the minutes of the meeting reveal a divided view on what should happen next. Some officials argued for further hikes, while others believed slowing economic growth made this unnecessary.

What does this mean for interest rates going forward?

It remains unclear what the Fed’s future policy on interest rates will be. Markets expect the May hike to be the last of the current cycle, but some FOMC members are sceptical that rate cuts will be necessary.

What other issues were discussed at the May meeting?

The minutes of the meeting also revealed concerns among FOMC members about the banking industry, with officials ready to use tools to ensure there was enough liquidity to cover its needs.

Fed officials less confident on the need for more rate hikes, minutes show
Fed officials less confident on the need for more rate hikes, minutes show

Minutes Reveal Lesser Confidence Among Fed Officials in Further Rate Hikes Necessity

Federal Reserve officials were divided at their most recent meeting over what to do with interest rates, according to minutes released on Wednesday. Though the decision to increase the Fed’s benchmark rate by a quarter percentage point was unanimous, the meeting summary reflected disagreement over what the next move should be, with a tilt toward less aggressive policy. Essentially, the debate came down to two scenarios: one, that was advocated by “some” members, judged that progress in reducing inflation was “unacceptably slow” and would necessitate further hikes, while the other, backed by “several” Federal Open Market Committee members, saw slowing economic growth in which “further policy firming after this meeting may not be necessary.” The minutes do not identify individual members, nor do they quantify “some” or “several” with specific numbers. However, in Fed parlance, “some” is thought to be more than “several.” The release of the minutes has come amid disparate public statements from officials on where the Fed should go from here. Markets expect that the May rate hike will be the last of this cycle and that the Fed could reduce rates by about a quarter percentage point before the end of the year, according to futures market pricing. However, virtually all officials have expressed skepticism, if not outright dismissiveness, towards the likelihood of a cut this year.

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