Fed minutes do not rule out that there may be new rate hikes in this cycle

Several members of the Federal Open Market Committee (FOMC) mentioned in their last meeting their willingness to tighten monetary policy even further if the risks to inflation materialize, after the first quarter of the year. there was data “disappointing”.

This is revealed by the minutes of the meeting held on April 30 and May 1, published this Wednesday, in which the Federal Reserve decided to continue maintaining interest rates unchanged, in the range of 5.25% to 5.5%, leaving them at its highest level in 23 years.

“Several participants mentioned their willingness to tighten policy further should risks to inflation materialize such that such action was appropriate.”says the text.

In the press conference after the announcement, the president of the FedJerome Powell stated that it is “unlikely” that the next step of the US central bank is a rise in interest rates, but after the publication of the minutes it is clear that not all members of the FOMC – the body in charge of deciding whether to raise them or not – think the same.

The members of this body – made up of the seven members of the Board of Governors of the Fed (its main body), the president of the New York Fed and four other regional Fed presidents who rotate each year – described as “disappointing” the inflation data for the first quarter of the year.

“Participants noted disappointing first-quarter inflation readings and indicators pointing to strong economic momentum, and assessed that it would take longer than previously anticipated to gain greater confidence that inflation was moving sustainably toward the 2%”says the text.

The meeting took place before it became known that inflation in April fell again after two months of consecutive increases. It fell one tenth to 3.4%, a figure that gives some respite to the Fed and its plans to lower interest rates sometime this year.

After the eleven increases made since March 2022, the Fed It has maintained interest rates since July of last year at a range of between 5.25% and 5.5%, its highest level since 2001.

At an event held last week in Brussels, Powell He reiterated that it is “likely” that the institution maintain rates at their current level at its next meeting to be held on June 11 and 12, and insisted that these should remain high for longer than expected.

Powell stated that more economic data than the first quarter is needed to know if inflation will be more persistent from now on and if it will take longer than expected to lower it to the 2% target.