“All participants agreed that the US economy was very strong, the labor market was extremely tight and inflation was very high,” according to the minutes, with “upside” risks of even faster inflation given current problems. of global supply, the war in Ukraine, and the ongoing coronavirus lockdowns in China.
In that context, “participants agreed that the (Federal Open Market) Committee should quickly move the monetary policy stance toward a neutral stance. (…) They also pointed out that a restrictive policy stance may become appropriate”.
“Many participants” judged that raising rates now “would leave the Committee in a good position to assess the effects of monetary policy tightening later in the year”.
The minutes show the Fed fully focused on the goal of steering the economy toward lower inflation without causing a recession or pushing a substantially higher unemployment rate, a task that “several participants” at this month’s meeting said they would be a challenge in today’s environment.
“Several” Fed officials said the data had begun to indicate that inflation “might stop getting worse.” But even they agreed that it was “too early to be confident that inflation had peaked.”
These definitions of the entity chaired by Jerome Powell cast a cloak of doubt on the future of economic activity not only in the United States but throughout the globe. On horseback from this perspective is that many institutions are already warning about a scenario of stagflation, that is, of stagnation in world growth simultaneously with high inflation, which in several central countries is at maximum levels in several decades.
After the minutes of the US central bank were released, the dollar rebounded internationally. Yesterday, the dollar index, which compares the US currency with a basket of similar currencies, rose 0.285% to 102.04.
In parallel, despite the message, the New York Stock Exchange closed with rises in its main indices. “The uniformity of opinion is a good thing,” said Ross Mayfield, an investment strategies analyst at Baird. “By the time (the Fed) gets to September, they will have plenty of economic data to make their move from there, so they continue to keep their options open.”
Source: Ambito
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