Federal Reserve minutes say it would be appropriate to slow rate hikes

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Federal Reserve minutes say it would be appropriate to slow rate hikes

According to the minutes from the Federal Reserve meeting held on 1st and 2nd November, a substantial majority of policymakers agreed that it would be appropriate to slow the pace of interest rate hikes.

The session was held amidst a widening debate about the repercussions of the U.S. central bank's rapid monetary policy tightening.

The Fed raised its policy rate by three-quarters of a percentage point for the fourth consecutive time during the meeting.

The minutes, released on November 23, said that a slower pace would allow the Federal Open Market CommitteeFederal Open Market Committee to assess progress toward its goals of maximum employment and price stability. The uncertain lags and magnitudes associated with monetary policy actions on economic activity and inflation were among the reasons cited. There was an emerging focus on the level to which rates must rise to lower inflation, and need to calibrate this process carefully, according to the minutes.

The minutes stated that the level to which the Committee raised the target range and the evolution of the policy stance had become more important considerations than the pace with monetary policy approaching a sufficiently restrictive stance.

The U.S. dollar declined against a basket of trading partner currencies after surging this year due to the Fed's tightening, which other major central banks have not been able to match.

There was a debate within the central bank about the risks posed by a tighter policy on economic growth and financial stability as a result of the minutes.

The minutes added that while a number of participants said slower rate hikes could reduce risks to the financial system, a few others said that any slowing of the Fed's policy tightening pace should wait for more concrete signs that inflation pressures are receding significantly.

The Fed's preferred measure says inflation continues to run at more than three times the Fed's two percent target, but recent data shows that inflation has peaked and a slowdown will be gradual.

Brian Jacobsen, a partner with Allspring Global Investments in Menomonee Falls, Wisconsin, said the path forward for monetary policy is a battle between the 'various' and the'several.

In addition to a policy statement, the Fed will also release new policymaker projections for the path of interest rates, inflation and unemployment during its upcoming meeting in December.