Several central bank officials considered a rate freeze in March, but eventually agreed to a hike

WASHINGTON, April 12 (Reuters) – Several Federal Reserve officials at the U.S. central bank’s policy meeting last month considered pausing interest rate hikes until it was clear that the failure of two regional banks would not cause broader financial stress. was a priority.

According to minutes of the Federal Open Market Committee’s March 21-22 meeting, released Wednesday, “several participants … considered whether it would be appropriate to keep the target range steady at the meeting” to assess how financial sector developments could affect lending and the path of the economy.

However, those officials, along with others, agreed that actions by U.S. policymakers and the central bank “helped calm conditions in the banking sector and reduced near-term risks to economic activity and inflation,” and a quarter supported it. -Percentage point rate increase despite fresh uncertainty surrounding the financial sector.

Inflation, meanwhile, “remains well above the Committee’s long-term target of 2%” and central bank officials “acknowledged … that recent data on inflation provided some indication that inflationary pressures have eased fast enough to return inflation to 2.% over time.”

The failures of Silicon Valley Bank and Signature Bank forced a panel into an unexpectedly complicated debate, but ultimately moved forward with higher interest rates.

“Some participants noted … that they would have considered a 50-basis-point increase in the absence of recent developments in the banking sector,” the minutes said. “Participants agreed that the extent to which these developments affect the outlook for employment and inflation and the risks surrounding the outlook will factor into the Group’s monetary policy decisions as recent bank developments.”

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Policymakers weakened their commitment to further rate hikes at the March meeting, dropping the need for “continuing increases” from the policy statement in favor of saying “some further” tightening would be needed.

“Participants noted that inflation was too high and the labor market too tight; as a result they expected that some additional policy stabilization would be appropriate,” the minutes said.

Report by Howard Schneider; Editing by Paul Simao

Our Standards: Thomson Reuters Trust Principles.

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