The Fed Wanted to Raise by 0.5%

The minutes are out from the Federal Reserve’s last meeting. It turns out that the Fed wanted to raise interest rates by 50 basis points, but the war in Ukraine changed their minds. If I were a cynical person, I’d say that was a very convenient excuse.

Many participants noted that—with inflation well above the Committee’s objective, inflationary risks to the upside, and the federal funds rate well below participants’ estimates of its longer-run level—they would have preferred a 50 basis point increase in the target range for the federal funds rate at this meeting. A number of these participants indicated, however, that, in light of greater near-term uncertainty associated with Russia’s invasion of Ukraine, they judged that a 25 basis point increase would be appropriate at this meeting. Many participants noted that one or more 50 basis point increases in the target range could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified. A number of participants noted that the Committee’s previous communications had already contributed to a tightening of financial conditions, as evident in the notable increase in longer-term interest rates over recent months.

This seems clear to me that the Fed wants to go 50 at the next three meetings, at least.

Posted by on April 6th, 2022 at 2:13 pm


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