According to the minutes of the March 21 and 22 meeting of the Federal Open Market Committee, published this Wednesday, “several participants (…) considered whether it would be appropriate to keep the target range stable at the meeting” to assess how developments in the financial sector might influence lending and the trajectory of the economy.
However, these authorities, along with others, agreed that the measures taken by US policymakers and the Federal Reserve had “helped to calm conditions in the banking sector and reduce near-term risks to economic activity and inflation”according to the minutes, and supported a rate hike of a quarter of a percentage point.
Inflation, on the other hand, “stayed well above the Committee’s long-term target of 2%,” and Fed officials “they agreed (…) that recent inflation data offered little indication that inflationary pressures were easing fast enough to bring inflation back to 2% over time.”
The minutes showed a committee forced by the bankruptcies of Silicon Valley Bank and Signature Bank to an unexpectedly complex debate, but one that ultimately went ahead with higher interest rates.
“Some participants indicated (…) that they would have considered a 50 basis point increase (…) in the absence of recent developments in the banking sector,” read in the minutes.
“Participants agreed that recent banking events would be factored into the Committee’s monetary policy decisions to the extent that they affect the employment and inflation outlook and the risks surrounding the outlook.”
At the March meeting, policymakers weakened their commitment to continue raising rates, removing from the monetary policy statement the need for “continuous increases” and merely saying that “some more tightening” would probably be necessary.
“Participants noted that inflation was still too high and the labor market was still too tight, so they anticipated that further monetary policy tightening might be appropriate.” according to the minutes.
Source: Ambito
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