Federal Reserve officials were preparing to start slowing monetary policy support as early as mid-November, minutes from their September meeting showed, and policymakers debated when to may need to raise rates amid rising inflation risks.
The Fed has bought $ 120 billion in bonds every month and holds ng the federal funds rate close to zero to make borrowing cheap and circulating money in the economy, fueling demand and speeding up the recovery. But they had reported following their September 21-22 meeting that they could announce un plan to reduce these asset purchases from the beginning of November. The minutes of the meeting, released Wednesday, provided further details on this plan.
The minutes suggested that "if a decision to start reducing purchases was taken at the next meeting, the reduction process could begin with monthly purchasing schedules starting in mid-November or mid-December.
The process could be completed by the middle of next year, the minutes indicated. This confirmed the timeline that Fed Chairman Jerome H. Powell presented in his post-meeting press conference.
At the same time , Fed officials have made it clear that they will continue to support the economy with low interest rates as the labor market continues to recover. Their hopes of progressing tVery gradually with regard to rate hikes could be complicated by rapidly rising prices, however, as pandemic supply chain disruptions persist and rising rents open the prospect of sustained increases.
Minutes showed that "different" meeting participants believed rates should stay at or near zero for a few years, warning that the long-term trends that had driven inflation down before the pandemic would come back to dominate. likely to remain high in 2022 with upside risks.
The committee as a whole was concerned about disruptions in the supply chain, which pushed inflation up and slowed down growth. They discussed several bottlenecks, especially in the housing sector.
"Participants noted that residential construction had been constrained by shortages of materials and other inputs and that home sales had been held back by limited supply of available housing, "the minutes showed, later adding that" businesses in a number of industries were facing difficulties in meeting high demand due to widespread bottlenecks in the supply chain. supply as well as labor shortages.
And maintainers have noted that it may take time to fade.
" Most participants viewed inflation risks as weighted upward due to fears that supply disruptions and labor shortages could last longer and have greater or more persistent effects on prix and salaries than they are currently assumed ", the minutes showed.
" Participants noted that their district contacts did not Usually didn't expect these bottlenecks to be fully resolved until next year or even later. "
consumption jumped more than expected last month, according to data released Wednesday. The consumer price index climbed 5.4 percent in September from a year earlier, faster than its 5.3 percent increase through August. From August to September, the index rose 0.4%, also above expectations.
The gains came as house prices were rising and food - especiallymeat and eggs - cost consumers more. Excluding volatile food and fuel, inflation is still fast, at 4% over the year until last month.
Officials Fed officials have repeatedly said that they expect price increases to moderate as the economy returns to normal, but they have maintained an increasingly suspicious tone as the inflation has been slow to moderate.
"I, like most of my colleagues, believe that the risks of inflation are on the rise, and I remains tuned in and attentive to underlying inflation trends ", Richard H. Clarida, Vice President of the Fed, said during a speech Tuesday.
Among the causes for concern: inflation expectations seem to be stuckspeed up, at least by some measure.
The consumer expectations showed this week that medium-term inflation expectations - those for the next three years - climbed to 4.2% in September from 4% in August. This is the highest since the series began in 2013. Short-term expectations jumped to 5.3%, also a new high.