A “very tight” job market and unabated inflation might require the Federal Reserve to raise interest rates sooner than expected and begin reducing its overall asset holdings as a second brake on the economy, U.S. central bank policymakers said in their meeting last month. In a document released on Wednesday that markets took as decidedly hawkish, the minutes from the Dec. 14-15 policy meeting showed Fed officials uniformly concerned about the pace of price increases that promised to persist, alongside global supply bottlenecks “well into” 2022. … The language showed the depth of the consensus that has emerged at the Fed in recent weeks over the need to move against high inflation – not just by raising borrowing costs but by acting with a second lever and reducing the central bank’s holdings of Treasury bonds and mortgage-backed securities. The probability that the Fed would lift interest rates in March for the first time since the pandemic’s onset rose to greater than 70%, as tracked by CME Group’s FedWatch tool.
Source: Reuters
