By Yasin Ebrahim

Investing.com – Some Federal Reserve policymakers were in favor of a faster pace of bond tapering amid concerns over elevated inflation, the minutes of the Fed’s November meeting showed on Wednesday.

At the conclusion of its previous meeting on Nov. 3, the Federal Open Market Committee kept its benchmark rate in a range of  0% to 0.25%, and said it would begin scaling back its $120 billion monthly bond purchases by $15 billion each month.

Starting this month, the committee announced that it will reduce its Treasury bond purchases to $10 billion and increase its mortgage-backed bonds purchases to $5 billion.

However, “some participants preferred to reduce at a faster pace that would lead to an earlier conclusion of net purchases,” according the Fed’s minutes. 

Recently, expectations for an increase in tapering speed were raised after Richard Clarida (Fed Vice Chair) stated last week that the Fed would discuss tapering at its Dec. 14-15 meeting.

Fed members stressed in the November meeting that the end of tapering – expected in mid-2022 – wouldn’t automatically lead to an immediate start of liftoff in rates as the bar to hike rates was more “stringent.”

Participants noted that the intention of reducing the pace at which net asset purchases is being reduced was not to signal any adjustments in the federal funds rates target range. The minutes revealed that they highlighted the stricter criteria used to raise the target range as opposed to the ones applied for starting to decrease the pace of asset purchase.

As traders keep increasing their wagers for Fed rate rises sooner rather than later, they have not only listened to the tapering pace but also the timeline.   

Traders are currently pricing in a first rate hike as soon as June next year, following by a second rate hike in the November, according to Investing.com’s Fed Rate Monitor Tool.

These aggressive wagers are made in the face of inflation above target that is showing little signs of abating.

The Personal Consumption Expenditures price index, the Fed’s preferred inflation measure, was up 0.6% on October, below the 0.7% rate expected, but ahead of prior’s month 0.4%. That took the annualized rate for October to 5%, well above the Fed’s 2% target.

While many are calling for sooner rather later rate hikes to curb inflation, others warn that rate hikes tend to have a delayed impact on the economy, and could ultimately prove counterproductive to the Fed’s goals.

“Making an abrupt shift on that policy today may create an effect some 12 months 18 months down the road that could occur at a time in which the inflation effects that we know today are quite high, begin to dissipate and maybe dissipate rapidly and therefore could work counter productively toward the Fed achieving its maximum employment policy,” Chief Investment Strategist at Janney Montgomery Scott told Investing.com in an interview on Tuesday.