FOMC minutes: Members split on need for most recent rate increase

Federal Open Market Committee members were somewhat divided about the need to once again raise the federal funds rate, although ultimately all agreed to do so, according to the minutes from the FOMC’s July meeting released today. The committee raised the rate’s target range by 25 basis points to 5.25% to 5.5% last month after approving a pause in June. The decision to raise the rate was unanimous, but a couple members said that they favored leaving the target range unchanged or would have supported such a proposal.

“They judged that maintaining the current degree of restrictiveness at this time would likely result in further progress toward the committee’s goals while allowing the committee time to further evaluate this progress,” the minutes state. The members were not identified.

As for future rate increases, committee members stressed that the decision would depend on what economic data shows at the time of the FOMC’s next meeting in September. They all agreed that the committee needs to retain a restrictive policy stance to return inflation to the Federal Reserve’s 2% target. They also agreed that the U.S. banking system was sound and resilient, although there was some concern about the risks associated with a potential sharp decline in commercial real estate valuations that could adversely affect some banks and other financial institutions that are heavily exposed to CRE.