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Most Federal Reserve officials at their last meeting favoured reducing the size of their interest rate hikes “soon”– just before raising their benchmark rate by a substantial three-quarters of a point for a fourth straight time.

The central bank’s policy makers saw “very few signs that inflation pressures were abating.” Still, a “substantial majority” of the officials felt that smaller rate hikes “would likely soon be appropriate,” according to the minutes of their Nov. 1-2 meeting released Wednesday.

The Fed is widely expected to raise its key short-term rate, which affects many consumer and business loans, by a half-point when it next meets in mid-December.

“Slowing the pace would give the [Fed] the ability to assess the economic landscape and see where they’re at,” Jennifer Lee, senior economist at BMO Capital Markets, wrote in a research report. “Short of some wild inflation report before the next meeting, [a half-percentage-point hike] sounds very reasonable in December. But the Fed is clearly not finished yet.”

Rising wages, the result of a strong job market, combined with weak productivity growth, were “inconsistent” with the Fed’s ability to meet its 2 per cent target for annual inflation, the policy makers concluded, according to the minutes of their Nov. 1-2 meeting released Wednesday.

At that meeting, the Fed officials also expressed uncertainty about how long it might take for their rate hikes to slow the economy enough to tame inflation. Chair Jerome Powell stressed at a news conference after the meeting that the Fed wasn’t even close to declaring victory in its fight to curb high inflation.

Still, some of the policy makers expressed hope that falling commodity prices and the unsnarling of supply chain bottlenecks “should contribute to lower inflation in the medium term.” Indeed, earlier this month the government reported that price increases moderated in October in a sign that the inflation pressures might be starting to ease. Consumer inflation reached 7.7 per cent from a year earlier and 0.4 per cent from September. The year-over-year increase was the smallest rise since January.

Wednesday’s minutes revealed that Fed officials thought that ongoing rate increases would be “essential” to keep Americans from expecting inflation to continue indefinitely. When people expect further high inflation, they act in ways that can make those expectations self-fulfilling – by, for example, demanding higher wages and spending vigorously before prices can further accelerate.

The Fed officials noted that employers were resisting layoffs even as the economy slowed, apparently “keen to hold onto workers after a year and a half of severe labour shortages. The U.S. unemployment rate is 3.7 per cent, just above a half-century low.

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