By Howard Schneider

WASHINGTON (Reuters) – Federal Reserve officers stated final month that the U.S. labor market was “very tight” and would possibly want the U.S. central financial institution not simply to boost rates of interest ahead of anticipated but additionally scale back its general asset holdings to tame excessive inflation, based on minutes of their Dec. 14-15 coverage assembly.

“Contributors typically famous … it could turn out to be warranted to extend the federal funds price sooner or at a quicker tempo than individuals had earlier anticipated. Some individuals additionally famous that it may very well be acceptable to start to scale back the scale of the Federal Reserve’s stability sheet comparatively quickly after starting to boost the federal funds price,” the minutes said.

The minutes, which had been launched on Wednesday, supplied extra particulars on the Fed’s shift final month in the direction of a extra hawkish financial coverage. Policymakers agreed to hasten the top of their pandemic-era program of bond purchases, and issued forecasts anticipating three quarter-percentage-point price will increase throughout 2022.

The minutes confirmed the Fed not simply debating an preliminary price improve, but additionally whether or not to make use of a second lever to curb inflation by permitting its holdings of U.S. Treasury bonds and mortgage-backed securities to say no.

The December assembly was held as coronavirus case counts had begun to climb because of the unfold of the Omicron variant.

Infections have exploded since then, and there was no commentary from senior Fed officers but to point whether or not the altering well being scenario has altered their views about acceptable financial coverage.

Fed Chair Jerome Powell will seem earlier than the Senate Banking Committee subsequent week for a listening to on his nomination for a second four-year time period as head of the central financial institution, and is prone to replace his views concerning the economic system at the moment.