US Fed Minutes Highlight Concerns About Inflation
US Fed minutes showed officials said at their previous meeting in July that “upside risks” to inflation could lead to further interest rate hikes.
Fed officials were concerned at their last meeting about the rate of inflation and said further interest rate hikes may be needed in the future if conditions do not change, according to the minutes of the meeting released on Wednesday.
That discussion during the two-day July meeting resulted in a quarter percentage point rate hike that markets typically expect to be the last in the cycle.
Concerns Remain Over Inflation
However, the discussions showed that most members are concerned that the fight against inflation is far from over and may require further tightening by the percentage committee of the Federal Open Market Committee.
“With inflation still well above the committee’s long-term target and the labor market situation remaining tight, most participants still see significant risks of higher inflation, which may require further tightening of monetary policy,” the meeting report said.
This latest increase lifted the Fed’s core borrowing rate to a target range of 5.25%-5%, the highest level in more than 22 years.
While some members said after the meeting that they thought further rate hikes might be unnecessary, the minutes call for caution. Officials cited a number of factors and stressed that future decisions will be based on the data received.
“In discussing the policy outlook, respondents continued to think it was important that the monetary policy stance be sufficiently tight to bring inflation back to the 2% target set by the committee over time,” the document says.
While it was agreed that inflation was “unacceptably high”, it was also pointed out that “there are a number of preliminary signs that inflationary pressures may be easing”.
“Nearly” all participants in the meeting, including non-voting members, were in favor of increased interest. However, opponents said they believe the committee could skip the raise and monitor how the previous raise affected economic conditions.
The minutes say: “Respondents generally noted a high degree of uncertainty about the cumulative impact on the economy of the previous monetary tightening.”
The minutes indicate that the economy is expected to slow down and unemployment is likely to rise slightly. However, economists have abandoned earlier forecasts that problems in the banking sector could lead to a mild recession this year.
