Faced with stubbornly high inflation, the US Federal Reserve is considering an accelerated schedule for raising the benchmark borrowing rate, according to minutes of its latest meeting released last night.
Most of those participating in the January 25-26 Federal Reserve discussions felt "a faster pace of increases would likely be warranted" compared to the previous cycle of monetary tightening between 2015-18.
The Fed slashed rates to zero in March 2020 as the Covid-19 pandemic slammed the US economy causing millions of layoffs.
Just two years later, with the economy facing decades-high inflation, the Fed has signaled that it is ready to begin rate hikes soon, with a first move widely expected next month.
Most economist say that lift-off from zero will be followed by several more hikes this year - with some now saying a larger-than-usual half-point increase is possible next month.
Fed officials stressed that the recovery has been much quicker than the previous cycle.
"Compared with conditions in 2015, participants viewed that there was a much stronger outlook for growth in economic activity, substantially higher inflation, and a notably tighter labour market," the minutes said.
After peaking at 14.7% in April 2020, the US unemployment rate in January was down to 4%.
But inflation has been accelerating for months amid global supply chain snarls and rising demand.
US consumer prices in January climbed 7.5% compared to a year earlier, its largest increase since February 1982 and more than triple the Fed's 2% long-term target.
Fed officials, many of whom had expected the pandemic-driven price pressures to recede quickly, now noted the increases growing more widespread, and some worried inflation could rise still higher if wages accelerate.
They "anticipated that it would soon be appropriate to raise" the policy rate, according to the minutes.
And "if inflation does not move down as they expect, it would be appropriate for the Committee to remove policy accommodation at a faster pace than they currently anticipate."
In the wake of the 2008 financial crisis, amid sluggish growth and persistently high unemployment, the Fed moved much more slowly.
It did not begin rate hikes until 2015, with a single move that year and the next, followed by seven from 2017 to 2018, before pulling back with three cuts in 2019.
The minutes caused some economists to up their forecasts, with Kathy Bostjancic of Oxford Economics now projecting a half-point increase as the first move.
"We now join the camp arguing the Fed should and will kick off its tightening cycle with a 50bps rate hike in March," she said.
"Thereafter officials should go back to 25bps rate increases at subsequent meetings," she said, predicting a total of 1.75 points of tightening, or six increases, this year.