Federal Reserve policymakers saw eye to eye that policy should remain restrictive for some time but were divided on whether inflation was high enough to bring the target federal funds rate down to the 2% target in their September meeting.
“A majority of participants judged that one more increase in the target federal funds rate at a future meeting would likely be appropriate, while some judged it likely that no further increases would be warranted,” minutes of the Federal Open Market Committee (FOMC) released on Wednesday showed.
All participants of the committee meeting agreed that the Fed’s monetary policy “should remain restrictive for some time until the committee is confident that inflation is moving down sustainably toward its objective.”
Minutes noted that all members of the rate-setting committee agreed that they should proceed carefully and that policy decisions at every meeting would be based on incoming data, taking into account “the balance of risks.”
Participants stressed that they would need to see more data indicating that inflation pressures were abating to be more confident that inflation was on course to return to 2% over time.
Officials also said that significant progress in reducing inflation hadn’t materialized in the prices of core services, excluding housing.
The meeting ended with the FOMC leaving the benchmark rate unchanged in the target range of 5.25%-5.5% – the highest level in 22 years. Since the central bank started its campaign to tame inflation in March 2022, the committee raised its key interest rate 11 times.
Since the September FOMC meeting, the 10-year Treasury yield rose to 4.66% as of Oct. 10, pricing in the rate increases policymakers indicated then.
The FOMC has two more meetings scheduled this year. Officials are scheduled to meet on Oct. 31 and announce the result of their two-day meeting on Nov. 1.
Most recently, Federal Reserve Governor Michelle Bowman noted that interest rates may need to rise further and stay higher for longer than previously expected to get inflation down to the central bank’s goal of 2%.
While Bowman didn’t comment on her expectations for the FOMC’s next rate decision, the governor noted domestic spending has continued at a strong pace and the labor market remains tight.
“This suggests that the policy rate may need to rise further and stay restrictive for some time to return inflation to the FOMC’s goal,” Bowman said Wednesday during an event in Marrakech, Morocco, on the sidelines of the World Bank and International Monetary Fund (IMF) annual meetings.