Fed Explores More Aggressive Interest Rate Hikes To Counter Inflation While Weighing Associated Risks

  • Federal Reserve officials discussed moving the U.S. central bank to a "restrictive" policy stance to counter inflation through more fierce interest rate increases, the Financial Times reports.
  • However, the policy could undermine the strong recovery in the jobs market. 
  • Some Fed officials also saw risks to commodities markets stemming from the disruptions associated with the Ukraine war.
  • Multiple officials saw risks to financial stability related to the tightening cycle that could hurt the liquidity of Treasury securities markets and the private sector's intermediation capacity.
  • Most U.S. monetary policymakers agreed to increase the Fed's primary interest rate between 0.75% - 1%, by 50 basis points at the next set of meetings.
  • The officials backed the central bank's plans to reduce its balance sheet and consider selling mortgage-backed securities as an additional tool.
  • Tackling the high inflation was currently the central bank's most significant challenge while retaining price stability to prevent the low-income households from getting bankrupt.
  • Photo by Pexels via Pixabay

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