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Fed meeting minutes show members ready to raise interest rates if inflation continues to be high

Federal Reserve Chairman Jerome Powell attends the House Financial Services Committee hearing on Capitol Hill in Washington, the United States on September 30, 2021.

Al Drago | Reuters

The committee that sets the Federal Reserve’s interest rates released the minutes of the November meeting where it first signaled it could recall all the economic help it provided during the pandemic .

After the two-day session that ended Nov. 3, the Federal Open Market Committee said it would start cutting back on the monthly bond buying program that had allowed it to buy at least $ 120 billion. treasury bills and mortgage-backed securities.

The objective of the program was to keep the flow of money in these markets while keeping wider interest rates at low levels to stimulate economic activity.

In its post-meeting statement, the FOMC said “further substantial progress” in the economy would lead to a reduction of $ 15 billion per month in purchases – $ 10 billion in treasury bills and $ 5 billion in MBS . The release says the pace would be maintained until at least December and likely continue until the end of the program – likely in late spring or early summer 2022.

Investors, however, were waiting for the minutes for a more in-depth look at what would make the Fed move even faster to withdraw its stimulus measures.

This is important because inflation has become even higher since the November meeting. In previous cycles, the Fed raised interest rates to cool the economy, but officials said they were prepared to allow inflation to rise higher than normal to allow the situation to rise. employment to improve.

Markets, however, are anticipating a more aggressive Fed. Contract traders betting on the future of short-term rates indicate that the Fed will increase its benchmark rate three times in 2022 at 25 basis point intervals, although current official projections do not call for more than one. rise next year. However, these markets are volatile and can change quickly depending on signals sent by the Fed.

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