While most participants at the Federal Open Market Committee’s July meeting believe inflation will ease as the effects of tariffs and earlier energy price increases wane, several pointed to the possibility that elevated inflation may be more persistent, according to FOMC minutes released today.
At the July meeting, the FOMC voted to maintain the target range for the federal funds rate at 3.5%-3.75. Three members voted against the action, instead preferring to raise the rate. The minutes show that participants judged their inflation outlooks as “highly uncertain” and believed inflation risks were skewed to the upside. The majority supported maintaining the current rate to wait for further economic information to provide more clarity about future policy action.
“Many participants assessed that policy tightening would likely be necessary if inflation did not decline,” according to the minutes. “Some participants commented that financial conditions might not currently be sufficiently restrictive to facilitate a return of inflation to 2%. Various participants suggested that financial conditions had tightened over the intermeeting period and that this development was partly a reflection of strong economic growth and market expectations that the Committee would adopt a more restrictive policy stance before long.”
