Fed Minutes Show More Rate Hikes Ahead

The minutes of the Federal Reserve’s June meeting, released Wednesday afternoon, showed most members thought further hikes are on the way, but considering the lagged impact of policy and other concerns, chose to pause after enacting 10 straight rate increases.

The minutes showed the officials felt that “leaving the target range unchanged at this meeting would allow them more time to assess the economy‘s progress toward the Committee’s goals of maximum employment and price stability.”

Voicing hesitance over a multitude of factors, FOMC members said a brief pause would give the committee time to assess the impact of the hikes.

“The economy was facing headwinds from tighter credit conditions, including higher interest rates, for households and businesses, which would likely weigh on economic activity, hiring, and inflation, although the extent of these effect remained uncertain,” the minutes stated.

The unanimous decision not to hike came in “consideration of the significant cumulative tightening in the stance of monetary policy and the lags with which policy affects economic activity and inflation.” The Fed left the target for the funds rate unchanged at 5 – 5.25 percent in June.

The minutes also showed the members disagreed on rate hikes. After the June meeting, all but two of the 18 participants expected that at least one hike would be appropriate this year, and 12 expected two or more hikes.

The minutes said that participants favoring a 25 basis point increase noted that the labor market remained very tight, momentum in economic activity had been stronger than earlier anticipated, and there were few clear signs that inflation was on a path to return to the Committee’s 2 percent objective over time.

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