(Washington) U.S. Central Bank (Fed) officials said it might be justified to hike interest rates earlier than expected, especially if Omicron bolsters price hikes, the latest report says. monetary meeting, published Wednesday.
“Most participants noted that[…] it could become justified to increase the key rates earlier or at a faster rate than what (they) had envisaged before, indicate the minutes of the meeting of December 14th and 15th.
The adjective “transitory”, used by Fed officials to qualify inflation since the onset of the crisis, had been withdrawn from the official statement and the Fed had increased its inflation projections.
Inflationary fever
The risks associated with the new variants had been taken into account, due to the appearance of Omicron a little more than two weeks before the meeting, and its very rapid progression.
“The risks to the economic outlook remain, especially due to new variants of the virus,” they said, according to the report.
And it could even worsen inflation, says the Central Bank citing “rising housing costs and rents, more widespread wage growth driven by labor shortages and prolonged global tensions on the part of the United States. ‘supply, which could be exacerbated by the emergence of the Omicron variant ”.
“Participants generally expect bottlenecks in the global supply chain to persist at least until next year,” the report added.
Long recovery from employment
In addition, “a number of participants felt that a substantial improvement in labor market participation would take longer than expected”.
The Fed has said it wants to keep rates low until the labor market returns to a level corresponding to full employment, but “some participants” “pointed out that there could be circumstances in which it would be appropriate »To meet them before achieving it.
During this meeting, the Fed announced that it would move up a gear by bringing forward by a few months the end of the reduction in asset purchases (“tapering”), a precondition for the hike in key rates, and paved the way three increases in 2022.
When purchases are reduced to zero, “there shouldn’t be a need […] of long delay ”before the first rate hike, commented the president of the institution Jerome Powell, during the press conference following this meeting.