FOMC Minutes Say Additional Hikes 'Appropriate': US Banking System Is Sound, Tighter Credit Conditions Are Ahead, In Fed's View

The SPDR S&P 500 Trust ETF SPY is volatile Wednesday afternoon after minutes from the Federal Reserve's last meeting showed that officials agreed to keep hiking rates in order to fight inflation, stressing that some additional policy firming may be appropriate to attain a sufficiently restrictive policy stance to return inflation to 2%.

In light of the uncertain economic outlook, Fed members agreed that in determining the appropriate monetary policy stance, they would continue to analyze the implications of incoming data.

What To Know: The Fed raised its target fed funds rate by 0.25% to 4.75%-5% in March, pushing borrowing costs to the highest since 2007.

Participants said the United States' financial system was sound and robust. They stated that recent banking sector events were expected to result in tighter lending conditions for families and companies, weighing on economic activity, hiring and inflation.

"Members are prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals," the March Fed minutes said.

Several participants stated that throughout their policy discussions, they pondered whether it would be prudent to keep the goal range constant at this conference.

Some participants stated that, in the absence of recent banking sector events, a 50-basis-point increase in the target range would have been reasonable at this meeting given consistently high inflation and the robustness of recent economic indicators.

The committee said it will consider the cumulative tightening of monetary policy, the delays with which monetary policy influences economic activity and inflation and economic and financial events when determining the magnitude of future rises in the target range.

Related Link: 5 Economists On March Inflation Data: Will The Fed Pause Interest Rate Hikes After May?

The Bureau of Labor Statistics reported on Wednesday that the CPI index increased by 5% year on year in March, down from 6% in February. The figure fell short of economists' expectations of 5.2%. The Fed's next decision on rates is due on May 22.

Market Reaction: The SPY was up 0.31% at $410.96 Wednesday afternoon, according to Benzinga Pro.

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