The Federal Reserve (FED) has been implementing several tactics to bring down soaring inflation. The fear of rising inflation and the expectation of an incoming recession has been worrisome factor for central banks across the globe.
FED raised interest rates by 50 BPS on December 15, 2022, and continues to be a prolonged and fierce economic tightening in 30 years. According to the details from the December policy meeting details of the central bank that was released on Wednesday, the FED officials have welcomed the recent drop in inflation numbers. However, the officials want robust evidence before they plan to cut down on the rates.
FED officials want to see a sustained downward inflation path
FED officials are collectively of the opinion that they want to witness progressive evidence depicting a sustained downward path for inflation. The officials also mentioned that the FOMC’s effort to restore price stability will be impacted if markets begin to loosen up financial conditions, particularly if they are lured by the FED’s reaction to the inflation data.
Out of the total of 19 FED officials, 17 of them agreed that they expect the rate to spike by 5% in 2023. The officials also concluded that they are trying to strike a balance between the risks of doing too little and raising rates too high. According to them, the former risk can lead to an increase in inflation, while the latter can lead to an unnecessary decrease in economic activity.