U.S. Federal Reserve building

Members of the U.S. Federal Reserve’s rate-setting Open Market Committee are considering a quarter-point increase in its key federal funds interest rate at each of its next two meetings, but could jack the rate by three-quarters of a point in November and a half-point in December, minutes of the committee’s meeting earlier this month reveal.

That schedule of increases would boost the rate from its current 4.5 to 4.75 percent to as high as 6.5 percent.

None of the members proposed cutting rates this year.

Recent news highlighting the economy’s continued strength is leading officials to think rates will need to be higher longer to reel inflation back to their 2-percent target.

Most think a slower pace of increases will do the job, the minutes showed, while some members worried about slowing rate hikes too soon.

“A number of participants observed that a policy stance that proved to be insufficiently restrictive could halt recent progress in moderating inflationary pressures,” the record said.

Markets have now priced in quarter-point rate hikes at each of the Fed’s next three meetings and expect the central bank’s benchmark rate to be about 5.4 percent by June.

In December’s meeting, a majority of committee members saw the fed funds rate climbing to 5.1 percent this year; more than a third thought the rate will have to rise above 5.25 percent. 

The committee will give further guidance at its next meeting on 21 and 22 March.

TREND FORECAST: As we detailed in this week’s ECONOMIC UPDATE, and in scores of Trends Journal’s the equation is simple: The higher interest rates rise, the deeper equities and economies decline.

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