Yesterday the minutes of the Fed have been published, i.e. the minutes of the recent meetings of the Federal Open Market Committee, better known by the acronym FOMC.
The FOMC is the organ of the US central bank, or the Federal Reserve (Fed), which monitors the open markets in the United States and above all it decides its monetary policy. Its main role is to regulate short-term monetary policy by setting the level of interest rates in the US.
As CNBC reveals, the minutes released yesterday by the Fed show that FOMC members expect interest rates to remain elevated until significant progress is made in fighting inflation.
Indeed, from the peak of 9.1% in September, general inflation in the US had already fallen to 7.1% in November, with five consecutive months of decline. However, it must also be said that 7.1% is still considered an excessive level, also because we started from a level below 2% at the beginning of 2021. The Fed’s goal for now still seems to be to bring inflation back to 2 %.
Given that November’s 7.1% is still a long way from 2%, FOMC members do not see a rate cut worthwhile right now. Indeed, in the minutes we read that no member of the FOMC expects a rate cut during 2023.
However, what is not clear is whether there will be new increases or not. Much will depend on the December and January inflation data, because if they do not confirm the strong downward trend of November, it is very likely that the Fed can continue to increase them.
If, on the other hand, the data for December and January confirm a strong downward trend in inflation, the FOMC may decide either to increase them further, to try to give the final blow to inflation, or not to increase them any more, as required by an important part of the US manufacturing system.