Faster Interest Rate Hikes Likely If Inflation Remains High
Federal Reserve policymakers concluded last month that they would accelerate their tightening of credit if inflation failed to slow in the coming months.
Most officials agreed that faster interest rate hikes would be needed “if inflation does not move down” as the Fed’s policymaking committee expects, according to the minutes of the central bank’s late January policy meeting, which were released Wednesday.
The minutes underscore the urgency that the Fed under Chair Jerome Powell feels about reining in a sharp spike of inflation, which has persisted longer and broadened to more industries than the policymakers had expected. As recently as December, Fed officials forecast that inflation, based on their preferred measure, would fall to an annual rate of 2.6%. It is currently 5.8%.
Most analysts expect Fed officials to raise that forecast at their next meeting, in mid-March, to reflect the acceleration of consumer prices. Inflation has reached its highest pace in four decades, hammering household budgets and wiping out the benefit of rising wages.
Fed officials are expected to raise their benchmark short-term rate several times this year beginning in March. At a news conference after their Jan. 26 meeting, Powell said the Fed would have “humility” and be “nimble” in its rate decisions. How quickly the policymakers raise rates, he added, would depend partly on how inflation and unemployment evolve.
Powell also said then that Fed policymakers are “of a mind to raise the federal funds rate at the March meeting, assuming that conditions are appropriate for doing so.”
Markets choppy on Fed news on interest rates
Stocks shook off an early slump and ended mixed on Wall Street Wednesday after minutes from the Federal Reserve’s latest policy meeting showed policymakers still leaning toward moving decisively to fight inflation.
The 10-year Treasury yield ended up at 2.03%, just below where it was late Tuesday.
The S&P 500 rose 3.94 points to 4,475.01. The benchmark index was coming off a broad rally on Tuesday that snapped a three-day losing streak. The Dow fell 54.57 points to 34,934.27, while the Nasdaq lost 15.66 points to 14,124.09.
Small-company stocks rose. The Russell 2000 gained 2.85 points, or 0.1%, to 2,079.31.
Gains in energy stocks, retailers and other companies that rely on consumer spending accounted for much of the S&P 500’s modest rise, keeping losses in the technology and communications sectors in check.
Rising inflation has been crimping profits and revenue for businesses in a wide range of industries. Many companies have been raising prices to offset the costs, including cereal maker Kellogg. That has raised concerns that consumers could eventually pull back spending, though the latest report from the Commerce Department shows that retail sales remained strong in January as the threat of the omicron variant of coronavirus faded.
The government reported Wednesday that retail sales surged 3.8% last month, whizzing past the projections of most economists. That compared to the prior month when sales slid 2.5%.
Energy prices have been particularly volatile so far this week.supplies and jolt markets.Compiled from Associated Press reports.
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