several members of the Fed in favor of an acceleration of the rate hike

It could be “appropriate” to return “quickly” to so-called “neutral” rates, that is to say around 2 or 2.50%, according to the members of the Fed’s monetary committee against 0.25% and 0.50% today.

The U.S. central bank (Federal Reserve, Fed) is expected to step up rate hikes in coming months, with several of its officials in favor of it in order to combat high inflation in the United States, according to the minutes of the meeting of 15 and 16 March, released Wednesday.

“Many participants pointed out that one or more 50 basis point (half a percentage point) hikes (ed.)…might be appropriate in future meetings, particularly if inflationary pressures remain high or subside. ‘intensify'”, it is stated in this document.

The Fed had started, at this meeting, to raise its rates, but had opted for a more modest increase, of only a quarter of a percentage point.

“Many participants (…) would have preferred an increase of 50 basis points”, according to the minutes, but “a number” of them “indicated that in light of greater uncertainty in the short term associated with Russia’s invasion of Ukraine, they felt a 25 basis point increase would be appropriate at this meeting.”

Reduce balance sheet size

The rates, which had been in a range of 0 to 0.25% since March 2020, are therefore now between 0.25% and 0.50%.

But it could be “appropriate” to return “quickly” to so-called “neutral” rates, that is to say around 2 or 2.50%, according to members of the Fed’s monetary committee.

To slow inflation, the Fed also plans to gradually part with the billions of dollars of Treasury bills and other assets it has purchased since March 2020. These have more than doubled the size of its balance sheet, which today stands at around 8.9 trillion dollars, compared to 4.1 trillion in February 2020.

Officials of the powerful Federal Reserve had indeed agreed at their March meeting that it might be “appropriate to begin this process at a future meeting, perhaps as early as May”, is – he further clarified within minutes.

Inflation in the United States is at its highest for 40 years, at 6.4% in February according to the PCE index, favored by the Fed, and at 7.9% according to another index, the CPI, used in particular to the indexation of pensions.

And the rise in prices should accelerate further in the months to come.

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