Fed officials divided on need for more rate hikes

The officials of the Federal Reserve They were divided on the need for further interest rate hikes at the central bank’s July 25-26 meeting, according to minutes of the session released Wednesday.

At the meeting, “some participantsThey cited the risks to the economy of pushing rates too far, though “most” of those responsible for monetary policy continued to give priority to the fight against inflation.

“Participants remained firm in their commitment to reduce inflation to the 2% target”, indicated the minutes of a meeting in which those responsible for the Federal Open Market Committee unanimously agreed to raise rates to the level of 5.25%-5.50%.

“Most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy.”

However, cautious voices about the effects of continued monetary tightening appeared to play a more prominent role in the debate last month, an indication that the dispersion of opinion at the Fed has widened as evidence is weighed that it inflation is subsiding and the potential damage to jobs and economic growth is being judged if rates are raised more than necessary.

“Some” participants, for example, advocated keeping the cost of credit unchanged in July.

The group alsodiscussed various risk management considerations that could influence future monetary decisions”, according to the minutes.

Although most held inflation as the primary risk, “Some participants commented that while economic activity had been resilient and the labor market had remained strong, there remained downside risks to economic activity and upside risks to the unemployment rate.”.

“These included the possibility that the macroeconomic effects of the tightening of financial conditions since the beginning of last year could prove more substantial than anticipated.”.

In general, according to the minutes, Fed officials agreed that the level of uncertainty remained high.

Also that future rate decisions would depend on their “whole” of the data that will arrive in the “next months” for “help clarify the extent to which the disinflation process continues”, a possible sign of a more patient approach to any further rise.

The July meeting came ahead of the release of data showing a decline in leading price indicators this summer, along with a decline in job creation.

Source: Reuters