Fed Minutes: Rates May Have to Rise on Sticky Inflation


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) - Federal Reserve officials appear divided over the 
direction of U.S. interest rates, with some policymakers suggesting that 
borrowing costs may have to rise if sticky inflation did not yield, according 
to minutes from the central bank's latest policy meeting published Wednesday 
(2/18).

   The minutes from the Federal Open Market Committee January 28 meeting showed 
little clarity among decision makers on what to do with rates, as price growth 
remains above the central bank's  2% annual target almost five years after the 
pandemic-driven surge.

   "Several participants indicated that they would have supported a two-sided 
description of the Committee's future interest rate decisions," the Fed said in 
the published minutes. This reflects "the possibility that upward adjustments 
to the target range (of) the federal funds rate could be appropriate if 
inflation remains at above-target levels," the minutes stated.

   Interest rates have been in a 3.5%-3.75% range since the Fed left them 
unchanged in January. Prior to that, the central bank carried out three cuts of 
25 basis points each from September to December, bringing rates down from a 
4.25-4.5% range.

   A return to rate hikes could strengthen the dollar, making crude and other 
energy products denominated in the U.S. currency more expensive for 
international buyers.

   U.S. inflation has remained above 2% for 59 consecutive months since first 
breaching that threshold in March 2021. While price growth has retreated from 
the 9.1%  reached in June 2022 during the pandemic period, it remains above the 
Fed's annual target.

    




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