In the minutes of the December FOMC meeting, the participants agreed that inflation was “unacceptably high”. They “concurred” that inflation data showed “welcome reductions in the monthly pace of price increases”, but “stressed that it would take substantially more evidence of progress to be confident that inflation was on a sustained downward path.”

Also, participants noted that risk to inflation outlook remained “tilted to the upside”, with possibility of “more persistent than anticipate” price pressures. Meanwhile, risks to economic activity outlook were “weighted to the downside”.

Participants continued to anticipate that “ongoing increases in the target range for the federal funds rate would be appropriate”. “No participant” anticipated that it’s appropriate to start lowering rates in 2023. They generally observed that a “restrictive policy stance would need to be maintained” for some time. Also, “several participants commented that historical experience cautioned against prematurely loosening monetary policy.”

Full minutes here.

Minneapolis Fed President Neel Kashkari said in a speech, “while I believe it is too soon to definitively declare that inflation has peaked, we are seeing increasing evidence that it may have .”

“In my view, however, it will be appropriate to continue to raise rates at least at the next few meetings until we are confident inflation has peaked,” he added.

The second step of inflation fighting would be “pausing to let the tightening we have already done work its way through the economy”. He sees interest rate pausing at 5.4%, but “any sign of slow progress that keeps inflation elevated for longer will warrant, in my view, taking the policy rate potentially much higher.”

The third step of inflation fighting is “to consider cutting rates only once we are convinced inflation is well on its way back down to 2 percent”.

But he warned, “Given the experience of the 1970s, the mistake the FOMC must avoid is to cut rates prematurely and then have inflation flare back up again. That would be a costly error, so the move to cut rates should only be taken once we are convinced that we have truly defeated inflation.”

Full speech here.