Federal Reserve officials are seeing increasing inflation risks due to coronavirus-related supply issues and higher energy prices, according to the highlights from the May meeting of the Federal Open Market Committee published on Wednesday.
The implications of the Russian invasion on Ukraine for the United States economy remain uncertain, the report added, arguing COVID-19 lockdowns across China have contributed to issues with global supply chains.
Most officials backed the 50 basis point increases in Fed interest rates at the upcoming FOMC meetings, noting a more “restrictive policy” could become appropriate. Many voting FOMC members saw the Fed as “well-positioned” for a post-tightening later this year. All participants at the Federal Reserve’s May 3-4 policy meeting backed a half-percentage-point rate increase to combat inflation they agreed had become a key threat to the economy’s performance and was at risk of racing higher without central bank action, newly released minutes of the session showed. The 50-basis-point rate increase this month was the first of that size in more than 20 years, and has set the Fed on course for a quick tightening of monetary policy, with “most participants” judging that further half-percentage-point increases would “likely be appropriate” at upcoming Fed sessions in June and July, according to the minutes, which were released on Wednesday.
“All participants concurred that the U.S. economy was very strong, the labor market was extremely tight, and inflation was very high,” the minutes said, with risks of even faster inflation “skewed to the upside” given ongoing global supply problems, the Ukraine war, and continued coronavirus lockdowns in China.
In that context, “participants agreed that the (Federal Open Market) Committee should expeditiously move the stance of monetary policy toward a neutral posture … They also noted that a restrictive stance of policy may well become appropriate.” NN: their is no doubt the FED will have to raise the shit out of rates. Our stock market friends want a rally back more then oxygen… It will fail big time. The only issue is if we can stand the rally back which we will short all the way up. Excuse me miss would you blow on my dice?