WASHINGTON–Members of the Federal Reserve’s Open Market Committee (FOMC) were supportive of the rate increase announced at its most recent meeting, but some now see risks in raising rates too high, meaning future increases are more unlikely, according to newly released meeting minutes.
According to the minutes from the July meeting, some members of the rate-setting committee indicated they believe the risks of raising rates too much versus too little “had become more two-sided, and it was important that the committee’s decisions balance the risk of an inadvertent overtightening of policy against the cost of an insufficient tightening.”
Despite that, and despite pushing rates to their highest level in 20 years, FOMC members continue to see significant risks that inflation might not fall as much as the Fed expects and wants to see, which could require them to raise rates again this year, according to the minutes.
The Risks
Those risks include stronger economic growth and the reversal of recent supply-chain improvements or declines in commodity prices, which have been largely responsible for the slowdown in inflation, the minutes show.
As CUToday.info has reported, economists within the credit union community believe the Fed is done with rate increases, with Goldman Sachs’ economists expecting rates to remain flat before the Fed cuts rates in q2 of 2024.
The Fed has set its benchmark federal funds rate at a range between 5.25% and 5.5%, the highest range in 22 years.
Recent consumer price data show inflation has slowed significantly. NAFCU Economist Noah Yosif shared his insights into the latest price numbers here.
The FOMC will next meet is Sept. 19-20.
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