Press "Enter" to skip to content

Federal Reserve Minutes are Showing Debate over Stimulus Pull

Last month, Federal Reserve officials debated how quickly they should begin withdrawing support for the US economy, given both the rate of recovery and inflation have surpassed their predictions. The Federal Open Market Committee (FOMC), the Fed’s monetary policymaking arm, issued minutes from its June meeting. It revealed growing anxiety among some officials that the bank will be compelled to boost rates or reduce asset purchases sooner than expected.

Following the meeting, Federal Reserve policymakers unanimously agreed to maintain the current interest rate range of 0 to 0.25 percent. In addition, they stated that it would continue to buy $120 billion in Treasury bonds and mortgage-backed securities until the economy made “substantial further progress” toward complete recovery.

However, minutes from that meeting revealed that some Fed officials debated whether they should begin easing that assistance sooner or if the economy would continue to grow at its present rate. The minutes read, “A substantial majority of participants judged that the risks to their inflation projections were tilted to the upside.”Many businesses, including leisure, hospitality, and manufacturing, have been hit severely by the pandemic, and officials have expressed concerns about supply chain disruptions, which have driven prices for many commodities higher, as well as hiring difficulties. However, other officials cautioned that supply bottlenecks and short-term reasons driving up inflation could fade even faster than projected, making it premature to begin cutting.

Following the June meeting, Fed policymakers raised their economic growth and inflation estimates from March projections. No Fed official expected the bank to raise interest rates until at least 2022, but several predicted a faster, more frequent series of hikes. As inflation increases above many bank officials’ expectations, the Fed is under increasing pressure to reduce its support for the recovery.

Be First to Comment

Leave a Reply

Your email address will not be published. Required fields are marked *