US Fed stresses need for further rate hikes

▲ Fed Chairman Powell

The Federal Reserve (Fed), the central bank of the United States, has emphasized the need for further rate hikes, but has warned that it will one day slow the pace of rate hikes.

According to the minutes of the July Federal Open Market Committee (FOMC) regular meeting released by the Federal Reserve on the 17th local time, meeting attendees said, "Inflation continues to be well above the target (2%), so going into a restrictive policy stance is not a good idea. It is absolutely necessary to achieve the Commission's obligations of maximum employment and price stability."

This was interpreted to mean that the base rate should rise above the neutral rate to a level that slows economic growth.

At the FOMC regular meeting held on the 26th and 27th of last month, the Fed took a 'giant step' that raised interest rates by 0.75 percentage points for two months in a row, raising the base rate to 2.25 to 2.50%.

At the meeting, the participants said, "The significant risk facing the Commission that the increased inflation rate could become fixed if the public began to doubt the Commission's will. It can be twisted," he warned.

At the same time, the Fed also hinted at the possibility that unusually large rate hikes will not last.

The minutes noted that "it seems appropriate at some point to slow the pace of rate hikes while assessing the impact of accumulated monetary policy adjustments on economic activity and inflation."

As the market pays attention to these dovish comments, the three major indices on the New York Stock Exchange are reducing their declines after the release of the minutes.