Although Federal Reserve officials announced a pause in interest rate hikes at the September monetary policy meeting, the minutes of the Federal Reserve's September policy meeting released in the early morning of October 12 Beijing time show that there are differences within the Federal Reserve on whether it is necessary to raise interest rates again this year.
At their September meeting, Fed officials decided to keep interest rates unchanged. Since the rate hike cycle began in March 2022, the Fed has raised rates 11 times, and the current federal funds rate range is 5.25% to 5.5%, the highest in 22 years.
With inflation falling steadily over the past year and the job market gradually cooling, officials felt confident enough to keep rates on hold for now, the minutes showed.
Most officials thought it might be appropriate to raise rates one more time at a future meeting, while some thought further increases might not be necessary.
Some officials argued that the policy focus should then shift from raising interest rates to discussing how long to keep them at restrictive levels.
In economic forecasts released last month, the Fed cut its forecast for rate cuts next year from 100 basis points to 50 basis points. A number of participants said the speed at which inflation returned to the Fed's 2 percent target would influence their views on the level of sufficient restraint for the policy rate and for how long it would remain so.
Raising interest rates will curb inflation, but it will also hit the economy to some extent.
"All participants agreed that the Committee was able to proceed cautiously and that policy decisions at each meeting would continue to be based on the full information received and its implications for the economic outlook and the balance of risks," the minutes said.
Fed officials noted that the ongoing UAW strike was "a new source of uncertainty" and that its intensification posed both upside and downside risks to inflation and economic activity. They also said the risk of volatility in energy markets "could undo some of the recent deflation."
A small boost to GDP growth next year will offset some of the dampening in the fourth quarter after September because of the auto workers' strike. The timing and scale of these effects are uncertain.
In addition, credit conditions could become tighter "if there are further strains in the US domestic banking sector".
It is worth noting that from the minutes of the July meeting, the Fed officials have stopped mentioning the recession, the Fed officials said that the data available at the September meeting showed that the third quarter of the United States real GDP growth was steady, the labor market continued to be tight, the unemployment rate was low, employment growth was slow but strong, and CPI inflation was still high. The September estimate was stronger than the one made in July, as consumer and business spending appeared more resilient than expected in the face of tighter financial conditions.
This article is from International Finance