The US Federal Reserve is signaling smaller rate hikes in the future

Fed Chair Jerome Powell

The minutes of the US central bank give investors information about the further possible rate hikes.

(Photo: IMAGO/Xinhua)

Washington The US Federal Reserve has announced a more cautious pace of interest rate hikes. “A clear majority of participants believed that a slowdown in rate hikes would probably be appropriate soon,” read Wednesday’s Minutes of the November 2 interest rate decision.

“A number” of Fed officials said a slower pace of rate hikes would allow an assessment of progress towards full employment and price stability. This approach is intended to take account of the fact that it is uncertain how long it will take for the interest rate hikes to take effect and how much of an impact they will have on the economy and inflation.

At the meeting in early November, the Fed raised its key interest rate sharply by 0.75 percentage points for the fourth time in a row. US Federal Reserve Chairman Jerome Powell and other Fed officials had recently announced a more cautious approach.

After all, the Fed has already raised key interest rates from almost zero to currently 3.75 to 4.0 percent this year. In addition, inflation has eased somewhat in recent months. On the futures markets, the chance of a smaller rate hike of 0.50 percentage points was now estimated at 79 percent at the mid-December meeting.

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As the minutes further show, a debate has also started among Fed executives about the risks of raising interest rates too quickly. Some policymakers thought slower hikes could reduce risks to the financial system. Still others stressed that there needed to be more concrete signs of a significant slowdown in inflation before the pace of hikes could be eased.

Inflationary pressures ease

In the meantime, however, there are increasing signs that the high inflationary pressure is falling more than expected – in both consumer and producer prices.

According to the US currency guard Mary Daly, who heads the San Francisco Fed district, the US central bank wants to slow down the economy as “gently and efficiently as possible” with its interest rate. However, according to her Fed colleague Esther George from Kansas City, it is becoming increasingly difficult to contain inflation without triggering a recession.

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