Inflation and balance sheet reduction message in Fed minutes

Minutes of the Fed's meeting showed that officials were concerned about inflation and that some members were ready to tighten monetary policy if inflation risks increased. Messages were also given in the minutes regarding the speed of balance sheet reduction.

The minutes of the Fed's April 30-May 1 meeting have been published. The minutes signaled that Fed officials did not have enough confidence to cut interest rates.

In order to reduce the risk of turbulence that may arise from balance sheet reduction, the Fed announced on May 1 that it would reduce the balance sheet reduction amount from 60 billion dollars to 25 billion dollars per month, starting from June. While the minutes show that almost all officials support the balance sheet reduction process, a few officials stated that they may support the balance sheet reduction amount to remain at previous levels.

Referring to the recent rise in inflation, the minutes said, "Participants observed that although inflation slowed down last year, the Committee had difficulty in advancing to the 2 percent target in the last few months. "Gaining greater confidence about inflation will take longer than expected."

It was stated in the minutes that some officials pointed out geopolitical events or other factors that lead to more serious supply bottlenecks or higher transportation costs, and that this situation could create upward pressure on prices and negatively affect economic growth.

In the meeting held after the inflation data exceeding the expectations in the last few months in the USA, the Fed left the interest rates unchanged at 5.25-5.5 percent.

In the minutes, some participants stated that an interest rate increase would be appropriate if inflation risks emerged.

Some members also pointed out the risk that financial conditions were too loose.