The Fed is in favor of a new rate hike of 25 basis points, although not unanimously

22 Feb. () –

The United States Federal Reserve (Fed) has anticipated more increases in interest rates as necessary to bring inflation to the 2% target, although there has been no unanimity in the pace of these increases, according to the minutes of their last monetary policy meeting, held on January 31 and February 1

The committee affirms that “almost all” of its members agreed that it would be appropriate to increase the price of money by 25 basis points, while “a few” were in favor of a rise of 50 points, understanding that an “insufficiently restrictive” monetary policy could derail the efforts undertaken so far to curb inflation.

“The members estimate that it will be necessary to maintain a restrictive policy until the data received clearly confirms that inflation is on a downward path towards 2%, which will probably take some time,” the document reads.

The Fed believes that economic growth in 2022 has been below the long-term average and has considered that it will “slow down further in 2023.” In addition, the committee shares the appreciation that the labor market remains “very tight” due to the lag between a demand for labor that exceeds that available and drives the wage bill upwards.

On the other hand, the central bank continues to consider an economic recession in the country as a “plausible” scenario at some point in the year after the weak growth of private domestic spending and the expected “tight” financial conditions.

On February 1, the Fed already decided to unanimously approve an interest rate rise of 25 basis points, until placing them in a target range of between 4.50% and 4.75%. Already then, the agency anticipated that more increases would be necessary throughout the year to counteract inflationary pressures.