Fed Saw ‘Significant’ Inflation Risk That May Merit More Hikes

Federal Reserve officials at their policy meeting in July largely remained concerned that inflation would fail to recede and that further interest-rate increases would be needed. At the same time, cracks in that consensus were also becoming more apparent.

“Most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy,” according to minutes of the US central bank’s July 25-26 policy meeting published Wednesday in Washington.

But two Fed officials favored leaving rates unchanged or “could have supported such a proposal,” instead of the rate hike the Federal Open Market Committee ultimately authorized at the conclusion of the meeting, the minutes showed.

“Minutes from the July FOMC meeting frame the emerging tension between inflation data that is moderating faster than the Fed anticipated and growth data that is coming in stronger than the Fed anticipated,” Evercore ISI economists led by Krishna Guha said in a note after the release.

The July rate hike brought the target range for the Fed’s benchmark rate to 5.25% to 5.5%, the highest level in 22 years. That marked a resumption of increases after officials left rates unchanged at the previous gathering for the first time since they began tightening in early 2022.