(Washington) The US central bank (Fed) is expected to accelerate rate hikes in the coming months, with several of its officials in favor of it in order to combat high inflation in the United States, according to the minutes of the meeting of the 15 and 16 March, released Wednesday.
Posted at 2:56 p.m.
“Many participants pointed out that one or more increases of 50 basis points (half a percentage point, editor’s note) […] may be appropriate at future meetings, particularly if inflationary pressures remain elevated or intensify,” the document reads.
The Fed had begun raising rates at its meeting last month, but opted for a more modest hike of just a quarter of a percentage point.
“Many attendees […] would have preferred a 50 basis point increase,” according to the minutes, but “a number” of them “indicated that in light of greater near-term uncertainty related to the invasion of Ukraine by Russia, they felt that an increase of 25 basis points would be appropriate at this meeting”.
The rates, which had been in a range of 0 to 0.25% since March 2020, are therefore now between 0.25% and 0.50%.
But it could be “appropriate” to return “quickly” to so-called “neutral” rates, that is to say around 2 or 2.50%, according to members of the Fed’s monetary committee.
To slow inflation, the Fed also plans to gradually part with the billions of dollars of Treasury bills and other assets it has purchased since March 2020. These have more than doubled the size of its balance sheet, which today reaches nearly 9 trillion dollars, compared to 4.1 trillion in February 2020.
Officials of the mighty Federal Reserve had indeed agreed at their March meeting that it might be “appropriate to begin this process at a future meeting, perhaps as early as May”, is- he further clarified within minutes.
Concretely, this means that the Fed no longer buys securities and lets the bonds mature, which leads to a mechanical reduction in its balance sheet.
In their discussions last month, officials of the institution leaned towards a rate of reduction of 95 billion dollars each month: about 60 billion dollars for Treasuries and about 35 billion for MBS (bonds guaranteed by real estate loans).
They also “majority agreed that the caps could be phased in over a period of three months or slightly longer if market conditions warrant,” the minutes state.
Inflation in the United States is at its highest in 40 years, at 6.4% in February according to the PCE index, favored by the Fed, and at 7.9% according to another index, the CPI, used in particular to the indexation of pensions.
And the rise in prices should accelerate further in the months to come.