The minutes from the December meeting of the Federal Reserve were released on Wednesday, highlighting key points regarding the current economic status and decisions regarding monetary policy.
The report stated that recent indicators have pointed towards a slowdown in the growth of economic activity from its robust pace in the third quarter. While job gains have moderated, they remain strong, and the unemployment rate remains low. However, inflation, although having eased over the past year, remains elevated.
The Federal Reserve acknowledged the soundness and resilience of the US banking system but expressed concerns about tighter financial and credit conditions for households and businesses. The anticipation is that these conditions could weigh on economic activity, hiring, and inflation. The Committee remains vigilant regarding inflation risks.
Addressing inflation
To support its objectives of achieving maximum employment and stabilising inflation at a 2% rate over the longer term, the Committee resolved to maintain the target range for the federal funds rate at 5.25 to 5.5%. However, the Committee plans to assess additional information and its implications for monetary policy moving forward.
The Committee will consider various factors in addressing inflation, including the cumulative effect of tightening monetary policy, the time lags in policy effects on economic activity and inflation, and overall economic and financial developments. Additionally, the Committee will persist in reducing its Treasury securities agency debt and agency mortgage-backed securities holdings.
“In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook,” the minutes stated. “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”
“The Committee’s assessments will consider a wide range of information, including readings on labour market conditions, inflation pressures and expectations, and financial and international developments.”
The report also details committee members’ unanimous voting for monetary policy action. These decisions involved maintaining the interest rate paid on reserve balances at 5.45 and directing open market operations to manage the federal funds rate within the target range. The Board of Governors unanimously approved the establishment of the primary credit rate at the existing level of 5.5%.