The central bank officials earlier this month highlighted the need to increase interest rates rapidly and perhaps more than the anticipation of markets to tackle a rising inflation problem, proceedings from their meeting released yesterday showed.
Not only did representatives see the requirement to hike benchmark interest rates by 50-basis points, but they also expressed the need for similar hikes at the next several meetings.
They also discussed that policy should shift from a neutral stance.
“Most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings,” the minutes said.
Federal Open Market Committee (FOMC) members said, “a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook.”
FOMC approved a half percentage point increase in its May 3-4 session which is the highest rate increase in the last 22 years and came as the central bank is trying to bring inflation down which is running at a 40-year high.
The meeting summary stated, “All participants reaffirmed their strong commitment and determination to take the measures necessary to restore price stability. To this end, participants agreed that the Committee should expeditiously move the stance of monetary policy toward a neutral posture, through both increases in the target range for the federal funds rate and reductions in the size of the Federal Reserve’s balance sheet.”
The central bank officials are committed to reducing the balance sheet and increasing rates. The minutes mentioned that doing so would leave the central bank in well-position later this year to reassess the effect its policy has on inflation.