Federal Reserve (Fed) officials are committed to fighting inflation and expect higher interest rates to remain in place until more progress is made, according to minutes of the central bank’s December meeting that were released on Wednesday.
The minutes showed that banking officials would be willing to scale back the size of its interest-rate rises but also said that history warned against being too quick to loosen monetary policy.
The minutes also stressed that officials are wrestling with two-pronged policy risks, first that the Fed doesn’t keep rates high long enough and allows inflation to fester, similar to the experience in the 1970s.
While, the second aspect is that Fed keeps restrictive policy in place too long and slows the economy too much, potentially placing the largest burdens on the most vulnerable groups of the population.
The policymakers have raised their key interest rate another half a percentage point, as they expressed the importance of keeping restrictive policy in place while inflation holds unacceptably high.
The officials showed that the central bank was concerned that inflation was 7.1 percent year on year in November 2022, well above the Fed’s long-term goal of 2 percent.
The increase ended a streak of four consecutive three-quarter point rate hikes, while taking the target range for the benchmark fed funds rate to 4.25 and 4.5 percent, its highest level in 15 years.
Along with the rate hikes, the Fed has been reducing the size of its balance sheet by allowing up to $95 billion in proceeds from maturing securities to roll off each month rather than be reinvested.
