Continued interest rate hikes risk a recession throwing millions out of work, experts warn.
“They judged that inflation would respond to monetary policy tightening and the associated moderation in economic activity with a delay and would likely stay uncomfortably high for some time,” the minutes read. “Participants also observed that in some product categories, the rate of price increase could well pick up further in the short run, with sizable additional increases in residential rental expenses being especially likely.
While conceding that “supply bottlenecks were continuing to contribute to price pressures,” Fed officials signaled they will stay the course with rate increases aimed at suppressing economic demand, an approach they acknowledged would likely cause higher unemployment. The Fed’s next policy meeting is in September, when another large rate hike is expected even amid evidence of moderating prices as well as slowing economic and wage growth.
“Participants observed that, in part because of tighter financial conditions and an associated moderation in the growth of aggregate demand, growth in employment would likely slow further in the period ahead,” according to the minutes. “They noted that this development would help bring labor demand and supply into better balance, reducing upward pressures on nominal wage growth and aiding the return of inflation to 2%.
“Participants remarked that a moderation in labor market conditions would likely involve a decline in the number of job openings as well as a moderate increase in unemployment from the current very low rate,” the minutes continue, noting that officials admitted the risk of hiking interest rates “by more than necessary to restore price stability.”
Fedspeak for unleashing mass unemployment: “Minutes of the Federal Open Market Committee July 26–27, 2022”
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