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Jerome Powell, Federal Reserve chair, speaks following the FOMC meeting in New York on Dec. 15, 2021; Photo: Michael Nagle/ Getty Images

Federal Reserve officials see forces fueling high inflation lasting potentially beyond 2022. That could mean raising interest rates sooner than they had thought, according to the minutes of their last policy meeting released Wednesday.

Why it matters: Fed leaders' view that inflation pressures aren't evaporating anytime soon means that the era of ultra-easy money is likely to end in 2022, creating risks for markets and the economy.

The big picture: Signs of deepening concern over inflation appear throughout the minutes of the meeting that concluded Dec. 15, where Fed leaders decided to wind down their quantitative easing program more quickly than had been planned.

  • The minutes said that it "may become warranted" to raise interest rates sooner and faster than expected.
  • Fed officials "noted that supply chain bottlenecks and labor shortages continued to limit businesses’ ability to meet strong demand and that these challenges would likely last longer and be more widespread than previously thought."
  • They also expected supply chain problems "to persist well into [2022] at least."
  • The central bank staff judged that risks around its inflation projection were "skewed to the upside."
  • Meanwhile, participants in the meeting "pointed to a number of signs that the U.S. labor market was very tight."

Yes, but: Only "a couple" of the meeting's 19 participants described concerns that higher inflation expectations would result in cost-of-living adjustments that signal a 1970s-style "wage-price spiral" of the sort that would demand more aggressive Fed tightening.

What's next: The Fed is heading into a complex next few months. Chair Jerome Powell faces a confirmation hearing and Senate vote on a second term in the coming weeks.

  • President Biden is expected to appoint three new Fed governors any day, and the Fed must decide how soon to raise its main interest rates after it concludes its quantitative easing program in March.

The bottom line: Inflation has been higher for longer than Powell and other top Fed officials expected — and they're now trying to put the brakes on without crashing the economy.

Go deeper

Rising mortgage rates could slow house price surge

Chart: Axios Visuals

Mortgage rates have jumped to their highest level since early 2020.

Why it matters: The rising cost of home loans could slow the booming American market for residential real estate.

Ben Geman, author of Generate
Jan 14, 2022 - Energy & Environment

Biden's latest Fed pick signals brewing climate battles

Illustration: Sarah Grillo/Axios

President Biden's plan to tap Sarah Bloom Raskin as top banking regulator at the Federal Reserve could intensify the central bank's already growing focus on climate change.

Catch up fast: The news broke Thursday night that Biden will nominate Raskin, a Duke University law professor, for the powerful role of vice chair for supervision.

Retail sales slipped a surprising 1.9% in December

Shoppers in San Francisco on Dec. 22. Photo: David Paul Morris/Bloomberg via Getty Images

Retail sales fell 1.9% in December compared to the previous month, suggesting that shoppers bought holiday gifts earlier last year as they faced rising inflation and supply chain issues.

Driving the news: The data is much lower than the 0% change predicted by economists, according to FactSet.