With inflation persistently remaining above the Federal Reserve’s 2% target, a majority of Federal Open Market Committee members believe that raising rates may be needed in the future if there is no progress toward that goal, according to minutes from the committee’s April 28-29 meeting.
The FOMC voted to maintain the target range of the federal funds rate at 3.5%-3.75% at the meeting. The minutes show that most participants believed that continued elevated inflation readings, along with the conflict with Iran, meant the committee would have to hold rates steady for longer than anticipated. A majority also raised the possibility of raising rates should inflation continue to remain above 2%.
“Several participants indicated that, in a scenario in which the conflict was resolved soon, rate reductions would be warranted later this year if the effects of higher tariffs and energy prices on inflation were to dissipate in line with their expectations,” according to the minutes. “Some participants expressed concerns, however, about a scenario in which sustained elevated energy prices, combined with the effects of tariffs, could result in inflation pressures becoming embedded more broadly, potentially de-anchoring inflation expectations and creating a greater tradeoff between the committee’s employment and inflation goals.”
