Fed minutes signal that rate hikes will continue until inflation falls

The Fed released the minutes of the Federal Open Market Committee (FOMC) meeting held on July 26-27.

The minutes of the last meeting, in which the policy rate was increased by 75 basis points to the range of 2.25-2.50 percent, showed that interest rate hikes would continue until inflation dropped significantly.

The minutes noted that the strength of the labor market could be stronger than the current GDP data on economic activity, raising the possibility of an upward revision in the GDP data.

It was noted that supply bottlenecks continue to contribute to price pressures, pointing out that Fed officials agree that there is little evidence to date that inflation pressures have eased.

In the minutes, it was emphasized that the slowdown in aggregate demand would play an important role in reducing inflation pressures.

"As inflation remained well above the Committee's target, officials concluded that a restrictive policy stance was necessary to meet the Committee's targets for maximum employment and price stability," the minutes said. statement was included.

It was considered that it would be appropriate to slow down the rate of increase in interest rates at some point.

In the minutes, it was noted that the pace of interest rate hikes and the extent of future policy tightening will depend on the effects of incoming data on the economic outlook and risks to the outlook.

"As the monetary policy stance tightens further, officials decided it would be appropriate at some point to slow the pace of rate hikes while assessing the effects of cumulative policy adjustments on economic activity and inflation," the Fed's minutes read. evaluation was made.

Inflation, which reached its peak in 41 years with 9.1 percent in June, increased the pressure on the Fed.

After the June meeting, the Fed increased the policy rate by 75 basis points at the July meeting and increased the federal funds rate to the range of 2.25-2.50 percent.

While inflation in the USA did not change on a monthly basis in July due to the recent decline in gasoline prices, it increased by 8.5 percent on an annual basis, below the expectations.

The Fed's next FOMC meeting is scheduled for September 20-21.