US Fed Says "More Restrictive Monetary Policy Appropriate"... Willing to Accept Economic Slowdown Concerns

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The United States central bank, the Federal Reserve (Fed), reaffirmed its intention to continue raising the benchmark interest rate despite concerns about some economic slowdown in order to curb soaring inflation.

On the 6th (local time), the Fed released the minutes of the June Federal Open Market Committee (FOMC) regular meeting, stating that the participants "all agreed that it is appropriate to move toward a restrictive policy stance based on the economic outlook." If inflation, which is at its highest level in about 40 years, does not come down, more restrictive policies may be implemented.

The participants decided to continue raising interest rates until inflation approaches the 2% target. Following the giant step of raising rates by 0.75 percentage points at the June FOMC meeting, they indicated a possible increase of 0.5 or 0.75 percentage points at the July meeting as well.

The minutes stated, "Participants recognized that the strengthened (tightening monetary) policy could slow economic growth for some time," but also noted that "bringing inflation back to the 2% target is important for achieving maximum employment sustainably." Even if concerns in the market about a potential U.S. economic slowdown or recession materialize, the priority remains 'price stability.' Earlier, the Atlanta Federal Reserve Bank's GDPNow, which compiles real-time data, estimated on the 1st that the U.S. second-quarter gross domestic product (GDP) growth rate would be -2.1% annualized.

Meanwhile, at the June FOMC meeting, 17 out of 18 members agreed to the 0.75 percentage point rate hike, with Esther George, President of the Kansas City Federal Reserve Bank, dissenting.