Fed Sees Nearly Complete Recovery in US Labor Market

The working market The US has recovered to almost the levels where the policy of keeping interest rates low is no longer necessary, officials of the Fed last month, according to the minutes of the meeting, which were released on Wednesday.

Executives at the US central bank also expressed concern that inflation is creeping into other sectors of the economy and that it is likely to last longer than previously calculated, the minutes added.

For these two reasons, the president of the institution, Jerome Powell, declared after the December 14-15 meeting that the central bank will accelerate its reduction of low interest rate policies.

Fed executives also indicated that they could raise the benchmark interest rate three times this year. That would be in sharp contrast to the September meeting, when there was disagreement among all 18 executives on whether to raise interest rates in 2022 just once.

The minutes reflect the recent change in priorities at the Fed: During the pandemic, it left interest rates almost to zero in order to stimulate hiring, and now it seeks to increase rates to keep inflation, which has reached its maximum level, at bay. in four decades.

Even executives who have spoken out in favor of keeping interest rates low – such as San Francisco Federal Reserve Director Mary Daly and Minneapolis Federal Reserve Director Neel Kashkari – now mention inflationary pressures. as a reason to increase interest rates this year.

After last month’s meeting, the Fed said it would reduce its monthly bond purchases – with which it has sought to keep interest rates low since early 2020 – to twice the pace set previously, and that it would likely stop making those purchases in March. The accelerated schedule seems to indicate that the Fed will start raising short-term interest rates in the first half of the year.

The reference interest rate, currently almost zero, affects loans to individuals and companies, including mortgages, credit cards and for vehicle purchases. Rates on those loans may start to rise later this year as well, although changes in Federal Reserve policy don’t always immediately impact other borrowing costs.