Fed minutes: Officials cited strong hiring to justify hikes

WASHINGTON (AP) — Federal Reserve officials suggested at their most recent meeting that a continuing streak of robust hiring could keep inflation elevated and was a key reason why they expected to raise interest rates this year more than they had previously forecast.

In the minutes of their mid-December meeting released Wednesday, the officials also underscored that a slowdown in their rate hikes — from four three-quarter point hikes in a row to a half-point increase — “was not an indication of any weakening” in their resolve to bring inflation back down to their 2% target.

Nor did the smaller increase signal “a judgment that inflation was already on a persistent downward path," the minutes said. Instead, the risks remained that inflation could stay higher than expected, officials said.

That message reflected concern that Wall Street traders were too optimistic that the Fed would soon suspend its rate hikes and even cut them later this year. Such a “misperception,” the minutes indicated, would complicate the Fed’s drive to lower inflation. This would occur if bullish traders sent stocks up and bond yields down, which would counter the Fed's efforts to cool the economy.

Overall, the minutes showed that Fed officials remained determined to keep rates high to quell inflation and have taken little comfort from inflation’s decline from a peak of 9.1% in June to 7.1% in November. The hard-line message caused the stock market to tumble after the Fed announced its latest rate hike and projected that there would be more hikes this year than had been expected.

“The minutes stress that the Fed is going to reduce inflation at the risk of hurting the labor market and the broader economy," said Ryan Sweet, chief U.S. economist at Oxford Economics.

At a news conference after last...