According to the Minutes, Fed Officials Anticipate “Soon” Rate Increases of a Lesser Magnitude.

Published on:

Last Updated on November 24, 2022 by Bitfinsider

As they examine the policy’s impact on the economy, Federal Reserve policymakers agreed earlier this month that future rate hikes should be more modest, according to the minutes of a meeting released on Wednesday.

Reflecting statements made by numerous officials over the past few weeks, the meeting report indicated that future rate increases will be modest. After four consecutive 0.75 percentage point rate hikes, it is widely anticipated that the Federal Open Market Committee will reduce its December rate hike to 0.5%.

Although they hinted that less severe measures were forthcoming, officials still see few indicators of inflation’s decline. Nonetheless, a few committee members voiced alarm over potential threats to the financial system should the Fed maintain its aggressive pace.

According to the minutes, “a solid majority of participants believed that a reduction in the rate of growth would likely be acceptable in the near future.” “The unpredictable lags and magnitudes associated with the effects of monetary policy operations on economic activity and inflation were given as grounds for the need of this evaluation.”

The minutes indicated that the lower rate increases would afford policymakers the opportunity to assess the impact of the succession of rate increases. The next interest rate decision will be made on December 14.

A few members suggested in the summary that “slowing the rate of increase could lessen the danger of financial system instability.” Others stated that they would prefer to wait before slowing down. According to officials, the balance of economic risks has shifted to the downside.

The markets were hoping for hints about not only what the next rate hike may look like, but also how far policymakers believe they’ll need to go next year to make sufficient success against inflation.

Officials at the meeting stated that it is equally crucial for the public to focus on how far the Fed would go with interest rates, rather than the rate of further increases within the target range.

The minutes indicate that the ultimate rate is likely to be greater than previously estimated. At the meeting in September, committee members estimated a terminal funds rate of approximately 4.6%; recent indications imply the level could approach 5%.

In recent weeks, authorities have spoken mostly in unity on the need to maintain the fight against inflation, while also hinting they can reduce the rate of rate hikes. This indicates a high possibility of a 0.5 percentage point increase in December, but an uncertain trajectory thereafter.

The markets anticipate a few more rate hikes in 2023, bringing the federal funds rate to approximately 5%, followed by possible rate cuts before the end of the year.

The markets perceived a line added to the FOMC’s post-meeting statement as a hint that future Fed rate hikes will be smaller. In calculating the rate of future increases in the target range, the Committee will consider the cumulative tightening of monetary policy, the lags between the effects of monetary policy on economic activity and inflation, as well as economic and financial events.

Following four consecutive 0.75 percentage point rises, the Fed’s benchmark overnight borrowing rate has risen to a range between 3.75 and 4 percent, the highest level in 14 years. Investors interpreted this as a nod to a reduction in the pace of future hikes.

Several Fed officials have stated in recent days that they foresee a likely move of 0.5 percentage points in December.

“They are reaching a position where they can go more slowly. This is useful because they don’t know exactly how much tightening they’ll have to do,” said Bill English, a former Fed official who is now a professor at Yale School of Management. “They highlight that policy operates with lags, so it’s advantageous to be able to move a bit more slowly.”

Recent inflation numbers have shown some hopeful trends despite being significantly above the official 2% target of the central bank.

In October, the consumer price index was up 7.7% from the previous year, the lowest level since January. The Fed constantly monitors the personal consumption expenditures price index excluding food and energy, which showed a 5.1% annual increase in September, up 0.2% from August and the highest level since March.

These reports were published following the November Fed meeting. Several officials stated that they viewed the reports favorably, but that they require additional information before they will consider removing policy restrictions.

Recent criticism has suggested that the Federal Reserve may be tightening too much. The concern is that policymakers are overly fixated on historical data and are overlooking indicators that inflation is waning and growth is decelerating.

However, English anticipates that Fed officials would maintain a cautious stance until there are clearer indications that prices are declining. He emphasized that the Fed is willing to risk an economic slowdown in pursuit of its objective.

“They face risks in both extremes, if they do too little or too much. “They’ve made it fairly clear that they see the risks of inflation escaping control and the necessity for a substantial tightening as the greatest threat,” he stated. It is a difficult time for Fed Chairman Jerome Powell.


Hardware wallets are safe and secure devices that can be used offline. They keep your cryptocurrency offline, making it impossible for you to be hacked. To find out more on the leading hardware wallets, you may view our reviews here: Ledger & Trezor
Disclaimer: Above are some affiliate links and we may collect a share of sales or other compensation from the links on this page.
Disclaimer: The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, legal, tax or other advice. Investing in or trading cryptocurrency or stocks comes with a risk of financial loss.

Related