In minutes, Fed signals interest rate hikes of 0.5 pp for upcoming meetings

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The majority of the members of the Open Market Committee (FOMC) of the Federal Reserve the central bank of U.S agreed that it would be appropriate to raise the interest rate by 0.5 percentage point at the next meetings, in June and July, according to the minutes of the last meeting released this Wednesday (25)

The United States began a cycle of interest rate hikes in March 2022 to combat the inflation in the country, which remains at the levels strongest in 40 years . So far, two increases have been made, with the rate going from the range of 0% to 0.25% per year to 0.75% to 1% per year.

According to the document, all committee members agreed that the US economy is “very strong”, with an “extremely tight” labor market and very high inflation.

The minutes indicate that Fed members felt that it will be necessary to move monetary policy quickly to a more neutral position, and that a restrictive interest rate, that is, focused on slowing the economy, may become appropriate.

Among the supply risk factors highlighted at the meeting are the effects of war in ukraine and the lockdowns carried out by the China since March to contain the advance of Covid-19.

The Fed also considered that a quicker removal of monetary stimulus will leave the authority well positioned to assess later in 2022 whether further adjustments are necessary.

Participants at the meeting also said they are “very aware” of inflationary risks, and agreed that these risks are on an upward trend.

Another point on the market’s radar is the process of reducing the size of the central bank’s balance sheet, which currently stands at around US$ 8.5 trillion. On the subject, the meeting’s participants supported a reduction plan, which should reduce the program of purchases and repurchases of securities to inject money into the economy, which was detailed at the May meeting .

The minutes state that the members of the autarchy expect solid growth in the Gross Domestic Product (GDP ) of the second quarter, after a fall in the first . For them, US economic growth should be close to or above trend for the rest of 2022.

*With information from Reuters

Source: CNN Brasil

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