WASHINGTON (AP) — Some Federal Reserve officials pushed to raise the Fed’s key rate by a quarter of a percentage point at their meeting last month to step up their fight against high inflation, though the central bank finally decided to forgo a rate hike.
In a sign of a growing division among policymakers, some officials came out in favor of a quarter-point increase or said they “could have supported such a proposal”, according to the minutes of the meeting. meeting of June 13 and 14 published on Wednesday. In the end, the 11 voting members of the Fed’s interest rate setting committee unanimously agreed to skip a hike after 10 straight hikes. But they have signaled that they may raise rates twice more this year, starting this month.
In Fed parlance, “some” is lower than “most” or “many,” evidence that support for another rate hike was a minority opinion. And some who held that view probably weren’t able to vote at the meeting; the 18 members of the Fed’s policy-making committee take turns voting.
Although last month’s vote to keep rates unchanged was unanimous, it’s relatively rare for the central bank to state in Fed meeting minutes that some officials disagreed with the committee’s decision. .
Twelve of the 18 members of the rate-setting committee were projecting at least two more rate hikes this year, according to members’ projections released last month. Four were considering another raise. Only two officials planned to keep rates unchanged.
Officials who favored a rate hike last month said “there were few clear signs that inflation was about to return” to the Fed’s 2% target anytime soon. The decision to forgo a hike left the Fed’s key rate at around 5.1%, its highest level in 16 years.
At the same time, a majority of officials said they plan to raise rates twice more this year – once more than previously expected. In their quarterly economic projections, policymakers are also forecasting higher inflation and slightly stronger growth than they envisioned in June. These upward revisions are a sign that the economy has been more resilient than Fed officials expected.
The aggressive series of Fed rate hikes has made mortgages, auto loans, credit cards and business borrowing increasingly expensive.
Many economists called the message from last month’s Fed meeting vague. On the one hand, the central bank chose not to increase borrowing costs. And Chairman Jerome Powell told a press conference that the Fed was slowing its rate hikes to allow time to assess their impact on the economy.
On the other hand, officials’ forecasts for two more rate hikes suggest they still believe more aggressive action is needed to defeat high inflation.
Some economists expect the Fed to hike rates at every other meeting as it seeks to pull off a tough maneuver: Raise borrowing costs high enough to cool the economy and tame inflation but not enough. to cause a deep recession.
Powell said that while a hike at every other meeting is possible, so is the prospect that the Fed might decide to raise rates at back-to-back meetings. Economists and Wall Street traders consider a rate hike at the next Fed meeting in three weeks to be virtually assured.
Fed staff economists continued to forecast a “mild recession” for later this year. They presented a similar forecast at the two previous Fed meetings.