Fed officials have warned that they will need to see “significantly more evidence” of easing inflation before they can be convinced that price pressures are under control because they have supported new rate hikes this year, according to the account of their latest meeting.

December meeting minutes, at the US central bank Starch The benchmark interest rate of half a percentage point, showed the Fed intends to keep squeezing the economy to try to address price pressures, which they warned could be “consistent than expected.”

The half-point rise ended a long string of 0.75 percentage point increases over months, and raised the target range for the federal funds rate to between 4.25 percent and 4.5 percent.

The decision in December came after new evidence that inflation appeared to have peaked as energy and commodity prices fell, developments that respondents described as “welcome”.

“Respondents generally noted that the restrictive policy stance should be maintained until incoming data provided confidence that inflation was on a sustainable downward trajectory to 2 percent, which was likely to take some time,” said the minutes, which were released on Wednesday. , referring to the federal inflation target.

The minutes also indicated that officials agree with how investors and others have absorbed their political contacts on Wall Street. In the weeks leading up to the December meeting, financial conditions eased as traders in fed funds futures bet that the Fed would roll back its tightening campaign sooner than officials indicated.

A number of respondents said that the slower pace of price increases “was not indicative of any weakening in the committee’s resolve to achieve its price stability target or to judge that inflation was already on a sustained downward trajectory.” according to the minutes.

Officials also warned that “undue easing in financial conditions, especially if driven by a public misunderstanding of the commission’s reactive function, would complicate the commission’s efforts to restore price stability.”

According to the “dot plot” for policy makers Interest rate Projections published after the meeting Most officials now see the federal funds rate peaking between 5 percent and 5.25 percent, with a large group of opinion that it may need to be raised even higher. This indicates at least 0.75 percentage point of interest rate hikes in the future.

At the press conference following last month’s interest rate decision, Jay Powell, the Fed chair, warned that he could not say “with confidence” that the central bank would not raise its ratings again as it seeks to push back Against speculation that she will soon abandon her tightening plans.

“We’ve covered a lot of ground and we’re not yet feeling the full effects of our rapid tightening yet. We have a lot more work to do,” he told reporters.

Michael Gapin, chief US economist at Bank of America, said the Fed could respond to easing financial conditions by raising interest rates more than expected and delivering a hawkish surprise to financial markets. The central bank next meets later this month, with an interest rate decision to be announced in early February.

The minutes did not indicate whether officials were likely to support another half-point rate hike or switch to a quarter-point increase, although the odds for a smaller jump are 70 percent, according to CME Group.

However, Jabin said he believes the Fed will go ahead with a half-point rate hike and warned that there is a chance the central bank will eventually need to raise interest rates to between 5.5 percent and 6 percent.

The dot graph showed interest rate cuts are not expected until 2024, when the benchmark rate is expected to drop to 4.1 percent, before easing to 3.1 percent in 2025. Growth is set to slow significantly while keeping Borrowing costs are high for an extended period. During the period, most officials expect an expansion of just 0.5 percent this year before a rebound of 1.6 percent in 2024.

It is estimated that the unemployment rate is likely to rise by about a full percentage point from its current level to 4.6 percent.

The minutes also noted that officials remain mainly concerned about “upside risks to the inflation outlook” and are not doing much in terms of tightening. But there are also concerns that the Fed will raise interest rates excessively and to the point of causing an “unnecessary reduction in economic activity”.

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While the weak economy is poised to exert downward pressure on prices, it is expected to take some time for inflation to drop to the Fed’s longstanding 2 percent target. The central bank’s preferred measure of inflation – the core personal consumption expenditures price index – is expected to fall to 3.5 percent by the end of 2023 and 2.5 percent in 2024. As of November, the index was hovering at 4.7 percent. Cent.

So far, the Fed’s tightening has been most felt in rate-sensitive sectors like housing, where prices have fallen dramatically from their coronavirus pandemic peaks. However, demand for labor remains high as consumers continue to spend, helping to offset inflationary pressures that have taken hold across the country. Services sector. And economists warn that eradicating them will require a recession and job losses.

Powell and his colleagues as well White House officialsMaintaining a recession, even with high unemployment, can be avoided.