FOMC minutes: Most members favored a lower rate increase

Nearly every member of the Federal Open Market Committee agreed to raise the federal funds rate by 25 basis points at the committee’s most recent meeting at the end of January, according to FOMC minutes released today. The increase was lower than the 50- and 75-point increases FOMC members had approved during several of their prior meetings. However, the minutes showed that committee members and staff still see inflation risk remaining elevated, with members anticipating that further rate hikes will be necessary before inflation returns to the Federal Reserve’s 2% target range.

During the meeting, several participants noted that recent economic indicators pointed to modest growth in spending and production, but that job gains have remained robust with low unemployment, according to the minutes. Some participants believed that recent economic data signaled a somewhat higher chance of continued subdued economic growth, although others said that the probability of the economy entering a recession in 2023 remained elevated.

Most FOMC members viewed a 25 basis-point increase as giving them room to better assess the economy’s progress toward reaching the committee’s goals, according to the minutes. A few favored a larger 50-point increase, saying it would more quickly bring the target range close to the levels they believed would achieve a sufficiently restrictive policy stance.