Meanwhile, US labour markets remain strong with the March jobless rate falling to 3.6 per cent as the economy created 431,000 jobs. The Fed’s 2 per cent inflation target is based on a separate measure, the personal consumption expenditures price index, which rose 6.4 per cent in the 12 months through February. The consumer price index soared 7.9 per cent in February, the most since 1982. Investors have priced in the possibility of more than seven rate increases in 2022 as inflation pressures spread, and see a roughly 66 per cent chance the Fed will raise rates by a half point next month. “Participants agreed they had made substantial progress on the plan and that the committee was well-placed to begin the process of reducing the size of the balance sheet as early as after the conclusion of its upcoming meeting in May.”ĭeutsche Bank analysts had noted before the minutes’ release that a tightening of bond purchases of $US95 billion or about $US570 billion in six months from June to December would be worth about one extra rate rise above adjustments in the fed funds rate. “Participants also generally agreed that the caps could be phased in over a period of three months or modestly longer if market conditions warrant.” “Participants generally agreed that monthly caps of about $US60 billion for Treasury securities and about $US35 billion for agency MBS would likely be appropriate,” the minutes said. The maximum total, composed of $US60 billion in Treasuries and $US35 billion in mortgage-backed securities, compares with the peak rate of $US50 billion a month the last time the Fed trimmed its balance sheet from 2017 to 2019. Oxford Economics chief US Financial Economist Kathy Bostjancic said she was now looking for a 0.50 percentage point rate rise at each of the Fed’s May and June policy meetings. Data since then has shown inflation easing and the labor market slowing modestly from the torrid pace of job and. “However, that, in light of greater near-term uncertainty associated with Russia’s invasion of Ukraine, they judged that a 25 basis point increase would be appropriate at this meeting.” The Fed set the target policy rate between 4.25 and 4.5 at its December meeting. “Many participants noted that – with inflation well above the committee’s objective, inflationary risks to the upside, and the federal funds rate well below participants’ estimates of its longer-run level – they would have preferred a 50 basis point increase in the target range for the federal funds rate at this meeting,” the minutes said. ![]() Only one member of the Fed’s interest rate committee, James Bullard, has publicly stated that he wanted to go ahead with a 0.50 percentage point rate rise at the March meeting. The Fed raised interest rates in March from near zero, where they had been held since March 2020, as the COVID-19 pandemic spread. The minutes released on Wednesday (Thursday AEST) showed “many” officials would have preferred to raise rates by a half percentage point - instead of the quarter-point move they made - but decided not to, in light of Russia’s invasion of Ukraine.
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