Federal Reserve Chair Kevin Warsh [Reuters]
Federal Reserve Chair Kevin Warsh [Reuters]

Many Federal Reserve officials said at last month's Federal Open Market Committee meeting that the benchmark interest rate may need to be raised further if inflation does not fall sufficiently, according to minutes released Wednesday.

The minutes from the July 28-29 FOMC meeting showed that many participants believed additional rate hikes would be necessary if inflation failed to decline to the Fed's 2 percent target.

Several officials who supported further tightening said "inflationary pressures remain broad-based" and argued that "a more restrictive policy stance should be adopted to achieve the goals of price stability and maximum employment."

They warned that delaying tightening would risk "having to take steeper and potentially more costly restrictive measures later."

At the meeting, the Fed voted to hold the benchmark interest rate at 3.50 to 3.75 percent. However, three officials dissented, calling for a 0.25 percentage point increase.

The minutes contained no discussion in favor of rate cuts. While expectations for a rate reduction within the year had been dominant earlier this year on the back of easing inflation, the latest minutes were instead marked by debate over the possibility of additional rate hikes.

Officials assessed that real economic activity in the United States has continued on a solid footing and that the labor market remains stable.

However, amid significant uncertainty over the inflation outlook, many officials said a renewed escalation of conflict in the Middle East could prolong supply chain disruptions and add to upward price pressures.

Fed Chair Kevin Warsh also asked officials for their views on reducing the number of annual FOMC meetings from eight to six. The rationale is that fewer meetings would allow roughly two months of economic data to accumulate between each session.

No decision has been made on the matter, and the 2026 meeting schedule remains unchanged.

Officials also said findings from a task force reviewing the Fed's future balance sheet management approach could be used to inform policy decisions.

However, most officials reaffirmed their existing view that the primary tool for adjusting the monetary policy stance should be changes to the federal funds rate target range, not the size of the Fed's asset holdings.


mokiya@heraldcorp.com