The minutes of the Fed meeting show that if inflation continues to remain high, Fed members are ready to raise interest rates

Federal Reserve Chairman Jerome Powell attends the House Financial Services Committee hearing on September 30, 2021, on Capitol Hill in Washington, USA.

Aldrago | Reuters

The committee that sets interest rates for the Federal Reserve released the minutes of its November meeting. In the minutes of the meeting, it hinted for the first time that it might withdraw all economic help provided during the pandemic.

After a two-day meeting that ended on November 3, the Federal Open Market Committee stated that it would begin to reduce the monthly purchase of at least US$120 billion in US Treasury bonds and mortgage-backed securities.

The goal of the plan is to keep funds flowing in these markets while keeping wider interest rates low to promote economic activity.

The Federal Open Market Committee stated in a post-meeting statement that “substantial further progress” in the economy would allow a monthly reduction of $15 billion in purchases-$10 billion in US Treasury bonds and $5 billion in MBS. The statement said that this pace will continue at least until December, and may continue to advance until the end of the plan-possibly in the late spring or early summer of 2022.

However, investors are waiting for the minutes of the meeting to gain a deeper understanding of what will prompt the Fed to withdraw its stimulus measures more quickly.

This is important because inflation has become more severe since the November meeting. In the previous cycle, the Fed raised interest rates to cool the economy, but officials said they are willing to keep inflation higher than normal in order to improve employment.

However, the market expects the Fed to take a more aggressive approach. Contract traders who bet on the future of short-term interest rates said that the Fed will raise interest rates three times at 25 basis points in 2022, although the official forecast is that there will be no more than one rate hike next year. However, these markets are highly volatile and may change rapidly based on signals from the Federal Reserve.

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