Minutes released Wednesday for the Federal Reserve’s December meeting provide more confirmation that the central bank plans to hold interest rates high through the entirety of 2023, potentially depressing housing activity for a longer period of time.

Enacting a smaller interest rate increase in December than in previous meetings following two months of positive inflation data, the Fed simultaneously worried many by downgrading its outlook for 2023, anticipating rates staying higher and the economy suffering more.

Now, meeting minutes seem to affirm that Chair Jerome Powell and other Fed members remain committed to pushing toward a restrictive monetary policy in order to tamp down on inflation.

“No participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023,” the minutes said. “Several participants commented that historical experience cautioned against prematurely loosening monetary policy.”

Powell has multiple times voiced his admiration for Paul Volcker, who chaired the Fed through the country’s worst inflation crisis in the 1970s and early 1980s. Volcker raised rates to nearly 20%, pushing mortgage rates to an all-time high of 18.63%, according to Freddie Mac.

Real estate economists broadly project that 2023 rates will settle somewhere around 5% by the end of 2023, but nearly everyone is watching Powell and the Fed for any indication of a policy change.

In December’s minutes, the housing market was mentioned specifically as evidence of “uncertainty” around consumer behavior in the current rate environment.

“Participants commented that higher mortgage interest rates had notably restrained housing activity and that they expected housing activity to remain weak,” the minutes said. “A couple of participants remarked on anecdotes or concerns from builder contacts about contract cancellations by purchasers no longer able to qualify for loans at higher interest rates.”

On the more positive side, recent decreases in rental costs are expected to show up in inflation data soon, alleviating one of the biggest burdens price increases have placed on consumers.

“Many participants observed that measures of rent based on new leases were indicating a deceleration, which would be reflected in the measures of shelter inflation with some lag,” the minutes said.

Overall, the Fed is continuing to project a hawkish stance (with the minutes specifically indicating that the 50-basis point hike was not a “weakening of the Committee's resolve”), while always leaving open the possibility of reacting to new data.

Stock indexes rose modestly following the news.

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