by Calculated Risk on 10/12/2022 02:06:00 PM
From the Fed: Minutes of the Federal Open Market Committee, September 20-21, 2022. Excerpt:
In light of the broad-based and unacceptably high level of inflation, the intermeeting news of higher-than-expected inflation, and upside risks to the inflation outlook, participants remarked that purposefully moving to a restrictive policy stance in the near term was consistent with risk-management considerations. Many participants emphasized that the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action. Several participants underlined the need to maintain a restrictive stance for as long as necessary, with a couple of these participants stressing that historical experience demonstrated the danger of prematurely ending periods of tight monetary policy designed to bring down inflation. Several participants observed that as policy moved into restrictive territory, risks would become more two-sided, reflecting the emergence of the downside risk that the cumulative restraint in aggregate demand would exceed what was required to bring inflation back to 2 percent. A few of these participants noted that this possibility was heightened by factors beyond the Committee’s actions, including the tightening of monetary policy stances abroad and the weakening global economic outlook, that were also likely to restrain domestic economic activity in the period ahead.