Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Readout of January meeting shows Fed not wed to particular pace of rate hikes

Economy Feb 16, 2022 04:51PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: The Federal Reserve building in Washington, U.S., January 26, 2022. REUTERS/Joshua Roberts/File Photo

By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) -Federal Reserve officials last month agreed that, with inflation tightening its grip on the economy and employment strong, it was time to raise interest rates, but also that any decisions would depend on a meeting-by-meeting analysis of inflation and other data, according to the minutes of the Jan. 25-26 policy meeting.

The account of the two-day session showed the U.S. central bank readying for a fight against the fastest pace of price increases since the 1980s, with officials saying that while they still expected inflation to ease through the year they would be ready to hike rates fast if it does not.

"Most participants noted that, if inflation does not move down as they expect, it would be appropriate for the (Federal Open Market) Committee to remove policy accommodation at a faster pace than they currently anticipate," the minutes stated.

As it stood, Fed officials said the strength of the economy and the high current pace of inflation would warrant raising rates quicker than the once-per-quarter pace seen during the tightening cycle that began in 2015 - a statement some analysts said perhaps points to rate hikes at every meeting this year.

The Fed meets eight times per year, or roughly every six to seven weeks.

But, with the United States still near a peak in coronavirus infections when the last policy meeting was held, the minutes gave no obvious indication policymakers were wed to a particular path - and, especially, no sense they would start the liftoff in borrowing costs at their upcoming meeting in March with a half-percentage-point rise in the benchmark overnight interest rate.

The Fed in recent years has stuck with smaller and usually well-anticipated quarter-percentage-point increases.

Among the Fed officials who have made public comments about monetary policy since the January meeting, most have favored a smaller initial increase, including two who spoke on Wednesday.

Even though surprised by the persistence of inflation, "participants emphasized that the appropriate path of policy would depend on economic and financial developments and their implications for the outlook and the risks around the outlook," the minutes stated.

Fed officials "will be updating their assessments of the appropriate setting for the policy stance at each meeting."

Bond yields fell and stocks on balance moved higher after the release of the minutes. The yield on the 2-year Treasury note, the maturity generally most sensitive to Fed interest rate expectations, slid to 1.52% from 1.55% and the S&P 500 index rose into positive territory on the day.

BALANCE SHEET DEBATE

Following the January policy meeting Fed officials issued a statement saying that it would "soon be appropriate" to raise the central bank's benchmark overnight interest rate from its near-zero level.

Data since the beginning of this year have, if anything, heightened the Fed's readiness to act. U.S. retail sales in January were strong, and U.S. employers added 467,000 jobs that month, far more than expected. The most recent inflation data showed no sign of easing from the current 40-year high.

But policymakers have not committed to much beyond the notion that they will increase rates at their March 15-16 policy meeting and will likely continue to raise rates through the year - depending on how inflation responds.

Investors had begun pricing in the prospect that the Fed would raise its target interest rate by half a percentage point next month, but they now see a quarter-percentage-point hike as more likely.

"While the minutes of the late-January FOMC meeting pre-date the release of the stronger-than-expected labour market and inflation data covering last month, officials didn't appear to be seriously considering either a 50bp rate hike to start the tightening cycle or a hike at each of the remaining seven policy meetings this year," said Paul Ashworth, chief North America economist at Capital Economics.

The Fed in January also released a broad set of guidelines about how it plans to reduce the nearly $9 trillion portfolio of securities held by the central bank.

Discussion of the balance sheet included debate about whether or not outright sales of securities will be needed, the minutes stated. Though no decision has been made, the minutes noted that "many" participants in the meeting said sales may be needed at some point in the future.

Readout of January meeting shows Fed not wed to particular pace of rate hikes
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (7)
Gershom Zvi
Gershom Zvi Feb 17, 2022 8:15PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Tomorrow is green day
Shep De
Shep De Feb 16, 2022 4:08PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Powell said, 'it'll be time to raise rates VERY SOON. The labor market is strong." So there you have it, March, because all the labor market did was get stronger w/ 479K Dec. jobs created + 709K revised Nov. , Dec. Sure, uptick unemployment rate, but 4% is near full employment. What gets me then is why Powell said, "We are not at maximum employment yet." I guess 1185K total jobs and 4% employment won't further translate to higher Wage Inflation and pat growth. WHAT is this man thinking! We are going to have 10% inflation next CPI print. Retail sales just will be fuel to the already overheated housing & jobs market.
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Feb 16, 2022 10:28AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
FOMC minutes will reveal the truth the discussions and negotiations fed governors were having with the stimulus lion 🦁 to let them go begging the lion not to finish them alive
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Feb 16, 2022 10:21AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
FOMC minutes will show how Dr. Jerome Bubble was found begging the stimulus lion 🦁 he has been riding on, to let him go if and when he gets off the stimulus lion 🦁. Dr. Jerome Bubble will be found asking the lion not to make children story out 🤣 his misadventures
Wilks Campbell
Wilks Campbell Feb 16, 2022 6:52AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Only this time for minimizing casualty at the same time not to get distracted from the South China confrontation.
Wilks Campbell
Wilks Campbell Feb 16, 2022 6:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
yes, after the crazy ppi rise! plus the fake Russia troop pull back. Actually Russian already silently moved in East Ukraine with Biden evil deal consent !Something similar in his evil deal in pulling out from Afrigan for selling arms for once awhile military complex dividend!
Kevin Avila
Kevin Avila Feb 16, 2022 6:25AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Should bring equities down… But who knows anymore.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email