Meeting minutes suggest that Fed members are prepared to increase interest rates if inflation remains high.
Members of the Federal Reserve are concerned about inflation and willing to tighten policy if it continues to rise, according to minutes from the November meeting.
The officials would be willing to hike interest rates "sooner than participants presently anticipate," according to the meeting summary.
They also stated at the meeting that they believe the current environment warrants a reduction in monthly asset purchases, with some members advocating for a more aggressive taper.
Officials from the Federal Reserve expressed concern about inflation at their meeting earlier this month and suggested they might be inclined to hike interest rates if prices continue to rise.
The Fed’s interest-rate-setting committee revealed minutes from its November meeting on Wednesday, in which it first hinted that it would be scaling back all of the economic assistance it has provided during the pandemic.
According to the meeting summary, there was a robust discussion about inflation, with members emphasizing their preparedness to act if risks arise.
“Various participants noted that if inflation continued to run higher than levels consistent with the Committee’s objectives, the Committee should be prepared to adjust the pace of asset purchases and raise the target range for the federal funds rate sooner than participants currently expected,” the minutes stated.
Officials emphasized the importance of taking a “patient” attitude to incoming data, which shows inflation is at its highest level in more than 30 years.
They did say, though, that they would “not hesitate to take appropriate actions to counter inflation pressures that posed dangers to its longer-term price stability and employment objectives.”
The Federal Open Market Committee announced on Nov. 3 that it will begin reducing its monthly bond-buying program, which has seen it purchase at least $120 billion in Treasurys and mortgage-backed securities during the previous two days.
The program’s purpose was to keep money flowing in certain areas while keeping broad interest rates low to stimulate economic activity.
The FOMC indicated in its post-meeting statement that “significant further progress” in the economy would allow it to reduce purchases by $15 billion per month, including $10 billion in Treasurys and $5 billion in MBS. According to the statement, the timetable would be maintained at least through December and would most likely continue until the program was terminated — most likely in late spring or early summer 2022.
Some FOMC members sought an even faster pace to give the Fed more discretion to hike rates sooner, according to the minutes.
“Some participants noted that slowing the pace of net asset purchases by more than $15 billion per month might be required so that the Committee would be in a stronger position to alter the federal funds rate target range, particularly in light of inflation concerns,” according to the minutes.
