When Federal Reserve officials met last month to discuss interest-rate policy, more officials were in favor of raising rates than at the previous meeting in June, according to minutes of the meeting, which were published Wednesday.
The record of the Fed’s meeting, released three weeks after its decision, showed that “several” officials favored raising interest rates. In June, only a “few” had supported tighter policy.
The Fed doesn’t define exactly how many officials “several” is. There were 19 top Fed officials present at the meeting, while 12 vote on policy decisions.
At the meeting, the Fed held its benchmark interest rate steady at a range of 3.5%-3.75%, but three officials dissented in favor of a 25-basis-point increase.
These officials said that price pressures remained broad-based and judged that the Fed should adopt a more restrictive policy stance to meet its commitment to achieving its 2% inflation target. Inflation has been above the Fed’s target for more than five years.
Officials who supported holding policy steady argued that information gathered between July and the Fed’s next meeting in mid-September “could provide more clarity and correspondingly reduce uncertainty about the inflation outlook.”
Looking ahead, “many” officials said rate hikes would likely be necessary if inflation did not decline.
Some officials said financial conditions might not be sufficiently restrictive to bring inflation down to the 2% target.
The minutes make clear that Fed officials remained divided over the inflation outlook.
While “most” Fed officials anticipated that inflation would step down over the rest of the year, “many” saw the possibility that inflation might be more “persistently elevated.”
Some Fed officials said that, even excluding the effects of tariffs and energy prices, underlying inflation appeared elevated.
Several Fed officials said that survey measures of inflation expectations, a key metric for the central bank, had moved higher than before the conflict with Iran.
The resumption of the war right before the Fed’s July meeting clouded the outlook for inflation, officials said.
Investors have lowered their expectations for a rate hike at the Fed’s next meeting in mid-September, after inflation data released following the July meeting came in soft.
The market has lowered the chances of a September rate hike to 56%, down from 82% right after the Fed’s July meeting, according to the Atlanta Fed’s Market Probability Tracker.