The meeting minutes from July provide an insight into the expected US economic development.
(Photo: Reuters)
new York The US Federal Reserve is preparing for a long fight against inflation, but is still leaving the extent of the next interest rate hike open.
As can be seen from the minutes of the most recent meeting in July, which were published on Wednesday, the monetary authorities have not yet indicated any preference as to whether they want to take another big interest rate hike of 0.75 percentage points in September or leave it at a hike of half a point.
They explained that this was dependent on the data situation. On the futures markets, however, after the minutes were published, the probability of the smaller rate hike was estimated at almost 60 percent.
According to the transcripts, participants at the meeting expressed the expectation that it might take longer than anticipated for the inflation problem to resolve. With its tighter monetary policy, the central bank wants to dampen overall economic demand and thus prevent prices from continuing to rise rapidly.
Top jobs of the day
Find the best jobs now and
be notified by email.
After the meeting on July 26th and 27th, the US Federal Reserve raised the key interest rate sharply by 0.75 percentage points – as it had done in June. It is now in a range of 2.25 to 2.50 percent.
Fed thinks further interest rate hikes are appropriate
The monetary authorities assume that further increases should be appropriate. Fed Chairman Jerome Powell said after the interest rate decision that a third major rate hike in September was possible in principle. The Fed would thus advance to an interest rate level at which the economy would be slowed down somewhat.
Rising prices
8.5
percent inflation
reported the USA in July compared to the same month last year.
According to the minutes, some meeting participants said interest rates would need to remain at “enough restrictive levels for some time” to keep inflation under control. Because of the high inflation, the Fed is under pressure to raise the price of money as quickly as possible.
US consumer prices rose 8.5 percent year-on-year in July, not quite as fast as the 9.1 percent increase in June.
The US inflation data for August, due before the next monetary policy meeting of the central bank in September, should be of decisive importance for the interest rate decision. Because the central bank will probably make a further decline in inflation a necessary prerequisite for the smaller rate hike of half a percentage point.
After the publication of the Fed minutes, yields on two-year government bonds fell, and the dollar exchange rate fell slightly. US stocks, on the other hand, reacted positively and partially recovered some of the trading day’s initial losses.
More: Inflation in the US is moderating – but pressure on the Fed remains high.