Fed minutes indicate cautious approach to future rate hikes

Fed minutes indicate cautious approach to future rate hikes

Minutes from the Federal Reserve’s October 31-November 1 meeting revealed that officials are in agreement that the central bank can proceed cautiously with future interest rate decisions. The readout from the meeting stated that policy decisions would continue to be based on incoming information and its implications for the economic outlook and risks. If progress toward the Fed’s 2% inflation target is deemed insufficient, further rate hikes would be appropriate. The Fed chose to keep interest rates unchanged at a range of 5.25%-5.50% at the meeting. Officials are expecting data in the coming months to provide clarity on inflation and the impact of higher rates and tighter financial conditions. The minutes also highlighted the possibility of inflation persisting or additional adverse supply shocks occurring. The Fed is closely monitoring the increase in long-term bond yields to determine if they can sustain high levels to counteract the need for higher rates. In a speech, Fed Chair Powell acknowledged that monetary policy is currently restrictive and putting downward pressure on inflation, but the central bank is open to further rate hikes if necessary. Some officials remain cautious and believe that inflation will only decrease with additional rate hikes, while others are satisfied with the progress made thus far. The latest inflation data showed a decline in core inflation but still remains above the Fed’s target of 2%. While investors do not expect additional rate hikes, there is a possibility of one more rate hike this year, which will be determined at the mid-December meeting.