Fed Officials Were Split Over June Rate Pause, Minutes Show

Federal Reserve officials were unanimous in their decision to raise interest rates earlier this month, but were conflicted on whether additional hikes would be necessary to bring inflation under control. Minutes from the last Fed meeting Released on Wednesday.

The Fed voted. Raising interest rates by a quarter point On May 3, the central bank’s 10th consecutive rate hike, from 5 to 5.25 percent. Started his campaign Although officials left the door open to further rate hikes to control inflation last year, the minutes make clear that “many” policymakers were leaning toward a pause.

“Several participants noted that if the economy develops according to their current outlook, no further policymaking will be needed after this meeting,” Minutes said.

Still, some officials believe that “additional policy tightening is likely warranted in future meetings” because progress in bringing inflation back to the central bank’s 2 percent target has been “unacceptably slow.” May be.

Policymakers believed that the Fed’s actions over the past year had contributed significantly to tighter financial conditions, and noted that labor market conditions had begun to ease. But he agreed that the labor market is still too hot. Strong benefits in job development And the unemployment rate near historically low levels.

Officials also agreed that inflation was “unacceptably high”. Although prices have increased. Showed signs of moderation. In recent months, the decline was smaller than officials had expected, and officials were concerned that consumer spending could remain strong and keep inflation high. However, some noted that tighter credit conditions could reduce household spending and reduce business investment.

Fed officials believed that the US banking system was “sound and resilient” after the collapse. Silicon Valley Bank And Signature Bank This year there was turmoil in the banking sector. Although they noted that banks were pulling back on lending, policymakers said it was too early to tell how big an impact credit tightening could have on the overall economy.

One source of concern for policymakers was the delinquent excess of the nation’s debt ceiling, which determines how much the U.S. can borrow. If the cap is not raised by June 1, the Treasury may be unable to pay all its bills on time, leading to default. Many officials said it was “essential that the debt ceiling be raised in a timely manner” to avoid the risk of further damage to the economy and turmoil in financial markets.

The central bank’s next move remains uncertain, with policymakers leaving their options open ahead of their June meeting.

Dallas Fed President Lori Logan said last week that another rate hike in June could be possible based on recent data. Still, he admitted it was too early to tell.

“The data in the coming weeks may yet show that it is appropriate to skip the meeting,” Ms Logan said in a speech on Thursday. “As of today, though, we’re not there yet.”

Minneapolis Fed President Neil Kashkari, in one Interview with the Wall Street Journal Last week, he said he might support keeping rates steady at the June 13-14 meeting to give policymakers more time to gauge how the economy is shaping up.

“I’m open to the idea that we can go a little more slowly from here,” he said.

Officials have reiterated that they will continue to monitor incoming data before reaching a decision. On Friday, the Commerce Department will release an updated reading of the personal consumption expenditures index, the Fed’s preferred gauge of inflation. Early next month, the federal government will also release new May job growth data.