Fed: Sharply higher rates may be needed to quell inflation
Federal Reserve officials were concerned at their meeting last month that consumers were starting to anticipate higher inflation, and they signaled that much higher interest rates could be needed to restrain it
WASHINGTON -- Federal Reserve officials were concerned at their meeting last month that consumers were increasingly anticipating higher inflation, and they signaled that much higher interest rates could be needed to restrain it.
The policymakers also acknowledged, in minutes from their June 14-15 meeting released Wednesday, that their rate hikes could weaken the economy. But they suggested that such steps were necessary to slow price increases back to the Fed's 2% annual target.
The officials agreed that the central bank needed to raise its benchmark interest rate to “restrictive” levels that would slow the economy’s growth and “recognized that an even more restrictive stance could be appropriate” if inflation persisted. After last month's meeting, the Fed raised its key rate by three-quarters of a point to a range of 1.5% to 1.75% — the biggest single increase in nearly three decades — and signaled that further large hikes would likely be needed.
The Fed has been ramping up its drive to tighten credit and slow growth with inflation having reached a four-decade high of 8.6%, spreading to more areas of the economy. Americans are also starting to expect high inflation to last longer than they had before — a sentiment that could embed an inflationary psychology and make it harder to slow price increases.
And with midterm elections nearing, high inflation has surged to the top of Americans’ concerns, posing a threat to President Joe Biden and Democrats in Congress.
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