(Bloomberg) -- Federal Reserve officials at their last meeting were open to removing policy support at a faster pace to keep inflation in check, even before data showed price pressures accelerating.
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"Various participants noted that the Committee should be prepared to adjust the pace of asset purchases and raise the target range for the federal funds rate sooner than participants currently anticipated if inflation continued to run higher," according to minutes released Wednesday of the Nov. 2-3 meeting of the Federal Open Market Committee.
Since the meeting, data on inflation have worsened. Commerce Department figures for October published earlier Wednesday showed prices rose 5% over the past year, marking the highest inflation rate since 1990.
"We now expect that the Fed will accelerate the pace of tapering at the December meeting," Deutsche Bank chief U.S. economist Matthew Luzzetti and his colleagues wrote in a research note. "As long as the data come in close to our expectations, our base case is that the Fed will announce a doubling of the monthly reduction," they wrote, wrapping it up by the end of March.
At the meeting, the FOMC decided to leave interest rates near zero and begin scaling back the pace of purchases in the $120-billion-per-month bond-buying program it launched last year, with an eye toward completing the process by mid-2022.
Completing the taper at an earlier date would give officials the option to raise interest rates sooner if that was deemed necessary to keep inflation in check. Officials in September were evenly split on the need for rate liftoff next year or in 2023. A fresh "dot plot" of their quarterly projections will be released at next month's Fed meeting.
Fed Chair Jerome Powell, speaking Monday at the White House after President Joe Biden picked him for another four years at the helm, said policy makers "will use our tools both to support the economy and a strong labor market, and to prevent higher inflation from becoming entrenched."
The minutes showed that officials "generally continued to anticipate that the inflation rate would diminish significantly during 2022," while "many participants pointed to considerations that might suggest that elevated inflation could prove more persistent."
"Even before the strong October data, which printed after the meeting, there was already a constituency in favor of speeding up the taper process if inflation continued to run hot," Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., wrote in a note to clients.
Concerns over inflation have led some Fed officials -- including outgoing Vice Chair Richard Clarida, Governor Christopher Waller, St. Louis Fed President James Bullard and San Francisco Fed chief Mary Daly -- to argue it may be appropriate to discuss speeding up the tapering process when the FOMC next meets Dec. 14-15.
Analysts saw other policy makers joining that camp.
"With the latest data suggesting that fourth-quarter GDP growth could be as strong as 6.5% annualized, we expect more officials to jump on that bandwagon," said Paul Ashworth, chief U.S. economist at Capital Economics. "The FOMC has clearly woken up to the realization that, even if it falls back somewhat, inflation is likely to remain above target for some considerable time."
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