While most Federal Open Market Committee members see current monetary policy as restrictive, they are uncertain about the degree of restrictiveness needed to return the rate of inflation to the Federal Reserve’s 2% target, according to the minutes of the most recent FOMC meeting. The committee decided to leave the target range for the federal funds rate at 5.25% to 5.5% at its April 30-May 1 meeting. The minutes show that FOMC participants debated the possibility that high interest rates may be having smaller effects than in the past.
“Participants discussed maintaining the current restrictive policy stance for longer should inflation not show signs of moving sustainably toward 2% or reducing policy restraint in the event of an unexpected weakening in labor market conditions,” according to the minutes. “Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.”
