According to minutes from the most recent Federal Reserve policy meeting released on Wednesday, U.S. central bankers do not believe it will be "appropriate" to start lowering interest rates this year given the continued high level of inflation.
After four sharp rate hikes, the Fed moderated its rate-hike pace in December, but the most recent report reveals officials were also worried about any "misperception" of their actions.
Officials cautioned that attempts to restore price stability would be complicated by an "unwarranted" easing of financial constraints, particularly if it were motivated by false public impressions.
As inflation soared to a 40-year high last year, the Fed launched a full-scale campaign to chill the world's largest economy. To reduce demand, the Fed increased the benchmark lending rate seven times.
After the Fed's December meeting, the rate was 4.25 to 4.50 percent, the highest level since 2007.
According to last month's meeting minutes, Fed policymakers believe "a restrictive policy stance would need to be maintained" until statistics show inflation is on a persistent downward path.
The goal is to get inflation back to 2%.
"No participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023," according to the meeting minutes.
A number of meeting participants also highlighted the importance to "clearly communicate" that a decrease in the pace of rate hikes did not indicate a lack of resolve in the fight against inflation.
A "persistent and unacceptably high" GDP growth is required for the time being because inflation is still "sustained period of below-trend" the research stated.
A robust labor market and people using their spare savings from the epidemic have probably aided spending in recent months, and this trend may continue.
However, several officials have remarked that consumers are switching to less expensive options as budgets are being pushed in lower-income homes. According to the Fed, this indicates that there is a lot of uncertainty surrounding the outlook for consumer spending as a whole.
In addition, the labor market is still "very tight" due to low unemployment, strong payroll growth, and rapid wage increases.
This has caused anxiety among officials, who are concerned that increasing pay may result in greater service costs for consumers.
Although there are modest signs of improvement, authorities expect labor market supply and demand to "come into better balance" with an appropriately restrictive monetary policy course, according to the minutes.
Policymakers also emphasized the importance of balancing restrictive policies with "an unnecessary reduction in economic activity, potentially placing the largest burdens on the most vulnerable groups." in the minutes.
