A tight labor market and high inflation convinced the Federal Open Market Committee to unanimously approve a 75 basis point rate-hike in July, according to minutes released today. Moreover, some participants said that once the policy rate had reached “a sufficiently restrictive level,” it likely would need to remain there “for some time” to ensure inflation was firmly on a path back to the Federal Reserve’s 2% target.
The minutes show FOMC participants anticipated that ongoing rate increases would be necessary but didn’t hint at what shape those would take. However, “as the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation.”
Participants saw little evidence to date that inflation pressures were easing. They did judge inflation would respond to monetary policy tightening but given the delay in associated moderation of economic activity, inflation pressures “would likely stay uncomfortably high for some time.”