Inflation concerns dominated the last Federal Reserve meeting

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Inflation concerns dominated the last Federal Reserve meeting

Concerns about inflation dominated the Federal Reserve’s November policy meeting, with some policymakers suggesting that the central bank should move more quickly to reduce its bond-buying program so that the Fed’s November policy meeting, if necessary. To be given the flexibility to raise interest rates sooner rather than later. Has shown.

The Fed is buying $120 billion in bonds every month and keeping interest rates close to zero, policy moves that have helped make borrowing cheaper and keep money flowing through the economy. Earlier this month, the Fed took the first step toward withdrawing support for the economy when it announced it would begin withdrawing its $15 billion a month Treasury bond and mortgage-backed security purchases beginning in November. Will give

“Some participants suggested that the pace of net asset purchases by more than $15 billion each month could be reduced so that the committee would be in a better position to make adjustments to the target range for the federal funds rate, particularly in response to inflation. pressure in the light,” the minutes showed, referring to the Federal Open Market Committee, which sets interest rates.

Those comments reflected uncertainty in the central bank about how long the supply chain could continue and the increased prices. Fed officials maintained their expectation that inflation would moderate “significantly during 2022,” but policymakers “signaled that their uncertainty about this assessment has increased.”

“Many participants pointed to views that might suggest that increased inflation could prove more stable,” officials said.

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Inflation has risen over the past year, posing a challenge to the Fed, which is responsible for maintaining stable prices as well as promoting maximum employment. Prices have continued to rise since the Fed’s last meeting, a trajectory that could prompt policymakers to reduce their economic support more quickly than previously thought.

Data released Wednesday showed prices rising at the fastest pace in three decades as consumers face higher prices for gas and food. According to the personal consumption spending index, the Fed’s preferred measure of inflation, prices rose 5 percent in the 12 months through October.

Fed Vice Chair Richard H. Clarida indicated last week that it might be appropriate for policymakers to consider accelerating the process of slowing bond purchases at its next meeting, adding that it is “watching closely the data that we find”. . Now and the December meeting. ”

Mary Daly, chair of the Federal Reserve Bank of San Francisco, told Yahoo Finance this week that she would be prepared to end the bond-buying program early if economic trends do not improve.

“If things keep doing what they were doing, I will fully support the faster pace,” Ms Daly said.

Officials have tried to part ways for slow bond purchases from their plans for interest rates. But investors expect rate hikes to start in the middle of 2022.

The Fed has said it wants to achieve full employment before raising borrowing costs to cool the economy.

Data released Wednesday by the Labor Department found initial jobless claims fell to their lowest point since 1969, falling to 199,000 last week.

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