WASHINGTON–Newly released minutes from the most recent meeting of the Federal Reserve’s Open Market Committee show officials believe they need to move “expeditiously” to raise rates to fight inflation.
Minutes from the May meeting further show the FOMC discussed the prospect of raising interest rates beyond the so-called neutral rate, at which they are neither supporting nor dampening the economy.
Discussions also acknowledged what working Americans already know--inflationary pressures can be seen across a broad array of goods and services. Talks also noted further supply chain disruptions from the Russian invasion of Ukraine and pandemic lockdowns in China were also threatening to push inflation higher.
“…Persistently high inflation heightened the risk that longer-term inflation expectations could become unanchored,” the Fed minutes state. That scenario makes it more difficult for the central bank to return inflation to the 2% annual average that is the Fed’s target.
Additional Debate
The minutes show debate around the FOMC table over when the inflationary pressures might ease, with several members stating that recent economic data suggests inflation might no longer be worsening, while also saying it’s too soon to know whether it had peaked. FOMC members also noted the job market and consumer and business spending remained strong, while sharing concerns over “downside” risks to the economy “and the likelihood of a prolonged rise in energy and commodity prices.”
The Fed’s policy rate is now set in a range of 0.75 to 1%. Fed Chairman Jerome Powell said in an interview that if economic conditions remain uncertain the Fed may need to go bigger — or smaller — depending on how things evolve.
The FOMC minutes indicate, “most participants judged that 50-basis-point increases in the target range would likely be appropriate at the next couple of meetings.”