The Fed is on track to increase the interest rate more aggressively in the coming months

The US Federal Reserve (Fed) is inclined to raise interest rates more aggressively than it has held so far, with increases of half a percentage point to combat runaway inflation.

The minutes of the agency's last meeting, released on Wednesday, reveal that most directors of the US central bank indicated that “one or several” half-point increases might be “appropriate.”

These minutes correspond to the meeting that the Fed held on 15 and 16 March, at the end of which it announced the first increase in interest rates since 2018, in a shift towards a contractive monetary policy to try to contain the price increase.

On that occasion, the US central bank raised the official interest rate by 0.25 percentage points, which placed it in a range of between 0.25% and 0.5%, after two years anchored at levels close to 0 to try to mitigate the effects of the covid-19 pandemic on the economy.

“Many participants” of the monetary policy meeting “would have preferred an increase of 50 basis points,” according to the Fed's minutes. But “a certain number indicated that in the light of increased short-term uncertainty associated with Russia's invasion of Ukraine, an increase of 25 basis points (is) appropriate at this meeting” in March.

The minutes, however, point to the possibility that at the next meeting of the agency, on 3 and 4 May, the rate hike will not return to 0.25 points, but will be already at half a point.

To contain inflation, the Fed will gradually dispose of billions of dollars in Treasury bonds and other assets it bought in March 2020 to inject liquidity into the economy. This will happen at “a next meeting, perhaps since May,” the minutes note.

Inflation in the United States is at a 40-year high, reaching 6.4% in February according to the PCE index followed by the Fed, and 7.9% according to the Consumer Price Index in the United States (CPI, what the final consumer pays).

In March, the unemployment rate in the United States stood at 3.6%, the lowest since the start of the pandemic and two tenths lower than the previous month, the Bureau of Labor Statistics (BLS) reported Friday.

The figure of 3.6% is close to the 3.5% recorded in February 2020, a low in 50 years, and shows the strength of the labor market at a time when covid-19 infections have decreased.

Speaking to the press at the White House, Biden said his government has created more jobs during the first 14 months of his term than any president in history.

“Our economy has gone from being on the road to recovery to being on the move,” said the president.

As he explained, 431,000 jobs were created in March, below expectations but marking the eleventh consecutive month with increases of more than 400,000 jobs per month, the longest streak since 1939.

Thus, with the decline in infections of the omicron variant of covid-19 since the end of January, the US economy has created 1.68 million jobs in the first quarter or an average of 562,000 per month, BLS said.

The Bureau of Labor Statistics report, however, shows that average wages of workers are being overtaken by inflation.

(With information from EFE)

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