Federal Reserve officials remain concerned that the strong U.S. economy would cause inflation to reaccelerate, according to minutes of the Fed’s meeting earlier this month that were released Tuesday.
“Most participants continued to see upside risks to inflation,” the minutes showed.
The upside risks to inflation they cited were that progress on disinflation stalls or inflation reaccelerates because of the continued momentum in economic activity, the summary said.
The minutes show that all Fed officials agreed it was best to proceed carefully.
Officials said additional rate hikes would be appropriate “if incoming data indicated that progress toward the Fed’s inflation objective was insufficient.”
At the meeting, the Fed’s interest-rate committee voted unanimously to hold rates steady in a range of 5.25%-5.5%.
Fed Chairman Jerome Powell told reporters after the meeting he wasn’t certain that rates were sufficiently restrictive” to bring inflation back to 2%. Economists said that Powell didn’t seem eager to raise rates again.
According to the minutes, all Fed officials said it would be appropriate for policy “to remain in a restrictive stance for some time until inflation is clearly moving down.”
At the same time, officials said the risks of achievement of the Fed’s goals had become “more two-sided.”
A smaller number of Fed officials pointed out that downside risks to economic growth also remained, the minutes said. The risks of slower growth included tight credit conditions, continued weakness in commercial real estate and potential disruptions in global oil markets.
The Fed’s forecast sees one more rate hike in coming months. Financial conditions have eased since the Fed’s meeting. Markets think the Fed has finished monetary tightening and will move to cut rates, as soon as the first quarter.
Since the Fed meeting, officials have stressed that the message that the Fed should move carefully and they are not confident that inflation is on a sustained trend towards the 2% target.
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