‘Almost all’ Fed officials backed quarter-point hike: minutes

A solid majority of Federal Reserve officials agreed at their last policy meeting to slow the pace of increases in the central bank’s benchmark overnight interest rate to a quarter of a percentage point but also agreed the risks of high inflation remained a “key factor” shaping monetary policy and warranted continued rate hikes until it was controlled.

“Almost all participants agreed that it was appropriate to raise the target range of the federal funds rate 25 basis points,” with many of those saying that would let the Fed better “determine the extent” of future increases, according to the minutes from the Jan. 31-Feb. 1 meeting which were released on Wednesday.

But as well, “participants generally noted that upside risks to the inflation outlook remained a key factor shaping the policy outlook,” and that interest rates would need to move higher and stay elevated “until inflation is clearly on a path to 2%.”

Only “a few” participants outright favored a larger half-percentage-point increase at the meeting, or said they “could have supported” it.

The minutes showed the Fed and Chairman Jerome Powell navigating towards a possible endpoint to its current rate increases, at once slowing the pace in order to more cautiously approach a possible stopping point while also leaving open just how high rates will ultimately rise in the event inflation does not slow.

During a year in which the Fed played catch-up with an inflation rate that soared to a 40-year high, the central bank raised its policy rate over eight meetings from a starting point near zero last March to the current 4.50%-4.75% range.

The policy statement issued on Feb. 1 said “ongoing increases” would still be needed but shifted the focus from the pace of coming rate hikes to their “extent,” a nod to the fact that policymakers feel they may be approaching a rate that is adequate to make continued progress in reducing inflation.

Data since the last meeting have shown an economy continuing to grow and adding jobs at an unexpectedly rapid pace, and making less steady progress back towards the Fed’s 2% inflation target.

The minutes showed Fed officials still attuned to the risk they might have to do more to keep inflation falling, a hawkish tilt that may come into more precise view when policymakers issue new interest rate and economic projections at a meeting in four weeks.

“Participants concurred that the [Federal Open Market] Committee had made significant progress over the past year in moving toward a sufficiently restrictive stance of monetary policy,” the minutes said, describing an economy that continued to grow amid a tight labor market.

“Even so, participants agreed that, while there were signs that the cumulative effect of the Committee’s tightening of the stance of monetary policy had begun to moderate inflationary pressures, inflation remained well above the Committee’s longer-run goal of 2% and the labor market remained very tight.”