Minutes of a recent bank meeting showed that the Fed may raise interest rates sooner than expected, cutting back on its monthly asset purchases at the same time. These actions are seriously considered by the Fed if inflation continues to rise.
Interest rates were kept near zero at the last meeting of the Fed, noting however that tapering would start November. This would see reducing its $120 billion monthly asset purchases.
With U.S. consumer prices hitting a 31-year high last month, the rate hike which was projected for late 2022, may now come in mid-2022
Minutes of the meeting of the Federal Open Market Committee (FOMC) on November 2-3 noted that they, “should be prepared to adjust the pace of asset purchases and raise the target range for the federal funds rate sooner than participants currently anticipated if inflation continued to run higher" to add, "Participants noted that the Committee would not hesitate to take appropriate actions to address inflation pressures that posed risks to its longer-run price stability and employment objectives."
Meanwhile, the Fed added that, given the risks in the global economy, like Covid-19 and supply bottlenecks, it would patiently monitor macro data.
It said, "Because of the continuing considerable uncertainty about developments in supply chains, production logistics, and the course of the virus, a number of participants stressed that a patient attitude toward incoming data remained appropriate to allow for careful evaluation of evolving supply chain developments and their implications for the labour market and inflation.”
(Written and edited by: The Decision Maker)