"Balance Sheet Reduction" Confirmed Hawkish in January Fed Minutes... Indicates Faster Tightening

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The U.S. central bank, the Federal Reserve (Fed), indicated that it will accelerate the pace of tightening starting with the Federal Open Market Committee (FOMC) meeting in March to reduce inflation.

According to the minutes of the January FOMC meeting released by the Fed on the 16th (local time), most participants expressed the view that the federal funds rate target range should be raised faster than in 2015. They agreed that it is appropriate to implement tightening policies such as rate hikes at a faster pace than currently anticipated. Additionally, some participants pointed out that a loose monetary policy could pose risks.

Regarding the scale of balance sheet reduction, many participants agreed that the current asset holdings are too large and that a substantial reduction is appropriate. Most participants agreed that balance sheet reduction should begin after the first rate hike. Some members argued that this timing should be moved forward.

The meeting also featured repeated concerns about inflation. Local media reported that the word "inflation" appeared as many as 73 times in the summary. Many participants expressed repeated concerns that recent inflation indicators significantly exceed the Fed’s long-term target and that stronger and more persistent inflation than expected has been confirmed.

After the minutes were released, major indicators of the New York stock market showed little volatility. As of 2:46 p.m. Eastern Time, the Dow Jones Industrial Average was trading 0.25% lower than the previous close. The S&P 500 index was down 0.05%, and the Nasdaq index showed a decline of 0.33%.

This content was produced with the assistance of AI translation services.