A 'very tight' job market and unabated inflation might require the Federal Reserve to raise interest rates sooner than expected and begin reducing its overall asset holdings as a second brake on the economy, U.S. central bank policymakers said in their meeting last month.
WASHINGTON, Jan 5 - A "very tight" job market and unabated inflation might require the Federal Reserve to raise interest rates sooner than expected and begin reducing its overall asset holdings as a second brake on the economy, U.S. central bank policymakers said in their meeting last month.
In a document released on Wednesday that markets took as decidedly hawkish, the minutes from the Dec. 14-15 policy meeting showed Fed officials uniformly concerned about the pace of price increases that promised to persist, alongside global supply bottlenecks "well into" 2022. Those concerns, at least as of mid-December, even appeared to outweigh the risks potentially posed by the fast-surging Omicron variant of the coronavirus, seen by some Fed officials as likely adding further to inflation pressures but not "fundamentally altering the path of economic recovery in the United States.
The language showed the depth of the consensus that has emerged at the Fed in recent weeks over the need to move against high inflation - not just by raising borrowing costs but by acting with a second lever and reducing the central bank's holdings of Treasury bonds and mortgage-backed securities. The Fed has about $8.8 trillion on its balance sheet, much of it accumulated during the coronavirus pandemic to keep financial markets stable and hold down long-term interest rates.
That, plus the prospect of the Fed reducing its presence in long-term bond markets, pushed the U.S. 10-year Treasury yield to its
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