trending Market Intelligence /marketintelligence/en/news-insights/trending/dWs7B-zSoFxmHZRgSQPFKQ2 content esgSubNav
In This List

Inflation continues to 'surprise on the downside,' Fed says

Blog

Europe: 5 key OTT trends to watch in 2022

Podcast

Next in Tech | Episode 50: InfoSec spending up, again…

Blog

Broadcast deal market recap 2021

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud


Inflation continues to 'surprise on the downside,' Fed says

Participants in the latest meeting of the U.S. committee responsible for setting monetary policy remained divided over the outlook for inflation, with a few cautioning against a rate hike while inflation remains below the Federal Reserve's 2% target.

Many meeting participants think that another rate hike is "likely to be warranted in the near term," according to minutes of the Federal Open Market Committee's most recent meeting released Nov. 22.

"Many participants observed, however, that continued low readings on inflation, which had occurred even as the labor market tightened, might reflect not only transitory factors, but also the influence of developments that could prove more persistent," the minutes stated.

Markets largely expect the Fed will again raise rates when it meets next month.

The FOMC unanimously voted Nov. 1 to leave interest rates unchanged, with the target range for the federal funds rate remaining between 1.00% and 1.25%.

The decision was partly due to the most recent inflation numbers, which showed the Fed's preferred inflation benchmark — personal consumption expenditures except for food and energy — increased by 1.3% in September compared to the previous year. That again undershot the Fed's 2% target.

The minutes say that inflation is "continuing to surprise on the downside," leading many FOMC participants to say that it will stay below the 2% goal "for longer than they currently expected."

FOMC members agreed that the economy will continue to grow and the labor market will strengthen. A few meeting participants also said congressional approval of a tax reform package seems more likely, which could lead to businesses increasing investments and helping the economy further expand.

And although the broader U.S. economy was affected by the hurricanes that struck parts of the country, along with the wildfires in California, meeting participants think that the economic effects on the country will be "mostly temporary."

The FOMC also discussed its nascent efforts to wind down the roughly $4.5 trillion Fed balance sheet. Meeting participants noted that the start of that program did not lead to significant market disruptions, partly due to the committee communicating the plan clearly ahead of time.

FOMC members agreed to include only a "brief reference" to the wind-down in their post-meeting statement. They said they may not mention it in future statements, as the balance sheet is "not anticipated to be used to adjust the stance of monetary policy" in the coming years.