Federal Reserve Officials Said They Were Open to Further Interest Rate Hikes in the US to Curb Inflation

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According to minutes of their last meeting in early May, some Federal Reserve officials signaled they would be willing to raise interest rates further if inflation became more aggressive.

“Various participants expressed a willingness to further tighten the policy
“Should inflation risks materialize in a way that would make such action appropriate,” according to minutes of the Federal Reserve’s May 1 Federal Open Market Committee meeting released Wednesday.

Prospects of a rate hike have fallen since the vote after new inflation data for last month came in weaker than expected. The minutes reflect the extent of central bank officials’ concerns about persistent inflation in the world’s largest economy.

At its May 1 meeting, the Fed kept interest rates at their 23-year high of 5.25 to 5.5 percent — a decision unanimously supported by voting members of the FOMC.

Rate-setters signaled in their post-meeting statement that they would keep borrowing costs high for longer than expected after disappointing data for January, February and March, when inflation remained well above the Fed’s 2 percent target.

“Participants discussed maintaining the current restrictive policy stance for longer if inflation shows no signs of a sustained move toward 2 percent, or reducing policy restraint in the event of an unexpected weakening in labor market conditions,” the minutes said.

Markets are pricing in one or two rate cuts by the end of 2024, and expectations have not changed since the minutes were released. The S&P 500 slipped 0.6 percent.

U.S. voters have repeatedly expressed their disapproval in recent months over President Joe Biden’s handling of the economy, despite a rising stock market and continued strong labor markets.

Biden’s rival in this year’s election for the White House, Republican Donald Trump, has made the higher cost of living of recent years part of his campaign. Higher Fed interest rates continue to lead to increased mortgage and other credit costs.

However, consumer price index numbers for April, released after the Fed’s interest rate meeting in May, showed price pressures were weaker than expected.

The measure the Fed uses for its 2 percent inflation target, headline personal consumption expenditures inflation, is also expected to fall in April. That data is due out next Friday.

Additional reporting by Kate Duguid in New York