WASHINGTON (TBEN) — Federal Reserve officials saw “very little sign of abating inflationary pressures” at their last meeting before raising their benchmark interest rate by a substantial three-quarters of a point for the fourth consecutive time.
Rising wages, the result of a strong labor market, coupled with weak productivity growth, were “inconsistent” with the Fed’s ability to meet its 2% target for annual inflation, policymakers concluded, according to the minutes of their 1-2 meeting. November. meeting released Wednesday.
At that meeting, Fed officials also expressed uncertainty about how long it might take their rate hikes to slow the economy enough to curb inflation. Still, some policymakers expressed hope that falling commodity prices and resolving supply chain bottlenecks “should contribute to lower inflation in the medium term”.
There were widespread expectations that sustained rate hikes would be “essential” to prevent Americans from expecting inflation to persist indefinitely, the minutes showed. When people expect further high inflation, they act in a way that can make those expectations fulfill themselves – for example, by demanding higher wages and spending vigorously before prices can rise further.