Further tightening is likely but will be slower

Jeff Cox, “Fed sees more rate hikes ahead, but at a slower pace, meeting minutes show,” CNBC, 07-05-2023, https://www.cnbc.com/2023/07/05/fed-minutes-july-2023-.html-- 嘉玮

Almost all Federal Reserve officials at their June meeting indicated further tightening is likely, if at a slower pace than the rapid-fire rate increases that had characterized monetary policy since early 2022, according to minutes released Wednesday.

Policymakers decided against a rate rise amid concerns over economic growth, even though most members think further hikes are on the way. Citing the lagged impact of policy and other concerns, they saw room to skip the June meeting after enacting 10 straight rate increases.

Officials felt that “leaving the target range unchanged at this meeting would allow them more time to assess the economy’s progress toward the Committee’s goals of maximum employment and price stability.“

Federal Open Market Committee members voiced hesitance over a multitude of factors.

They said that a brief pause would give the committee time to assess the impacts of the hikes, which have totaled 5 percentage points, the most aggressive moves since the early 1980s.

“The economy was facing headwinds from tighter credit conditions, including higher interest rates, for households and businesses, which would likely weigh on economic activity, hiring, and inflation, although the extent of these effect remained uncertain,” the minutes said.

The unanimous decision not to raise rates came in “consideration of the significant cumulative tightening in the stance of monetary policy and the lags with which policy affects economic activity and inflation.”

Markets showed little reaction to the release. The Dow Jones Industrial Average was off about 120 points nearing the final hour of trading while Treasury yields were sharply higher.

Disagreement at the Fed

The document reflected some disagreement among members. According to projection materials released after the June 13-14 session, all but two of the 18 participants expected that at least one hike would be appropriate this year, and 12 expected two or more.

“The participants favoring a 25 basis point increase noted that the labor market remained very tight, momentum in economic activity had been stronger than earlier anticipated, and there were few clear signs that inflation was on a path to return to the Committee’s 2 percent objective over time,” the minutes said.

Even among those favoring tightening, there was a general feeling that the pace of hikes, which included four straight 0.75 percentage point increases at consecutive meetings, would abate.

“Many [officials] also noted that, after rapidly tightening the stance of monetary policy last year, the Committee had slowed the pace of tightening and that a further moderation in the pace of policy firming was appropriate in order to provide additional time to observe the effects of cumulative tightening and assess their implications for policy,” the minutes said.