Federal Reserve officials were privately divided over whether they should pause interest rate hikes despite unanimously voting to do so last month, according to meeting notes released Wednesday.
Minutes from the June meeting of the Federal Open Market Committee (FOMC) — the panel of Fed officials responsible for setting interest rates — showed disagreements among top officials behind a public show of solidarity.
The FOMC voted unanimously at the end of the June 13-14 meeting to pause interest rate hikes after 10 consecutive increases since March 2022. But some FOMC members voiced support for another 0.25 percentage point hike before voting with the rest of their colleagues.
“Some participants indicated that they favored raising the target range for the federal funds rate 25 basis points at this meeting or that they could have supported such a proposal,” the minutes read.
“The participants favoring a 25 basis point increase noted that the labor market remained very tight, momentum in economic activity had been stronger than earlier anticipated, and there were few clear signs that inflation was on a path to return to the Committee’s 2 percent objective over time.”
It is not uncommon for FOMC members with dissenting views to vote along with their colleagues, particularly in challenging moments for the Fed.
After sprinting to raise rates in the face of surging inflation, the Fed is mulling how to prevent price growth from rising again without slowing the economy into a recession.
Inflation has fallen sharply after peaking at an annual rate of 7 percent in June 2022, according to the personal consumption expenditures (PCE) price index, down to an annual rate of 3.8 percent last month. The U.S. economy has also remained sturdy throughout the rate hikes, adding jobs at a solid rate and maintaining an unemployment rate in line with pre-pandemic lows.
Inflation is still roughly twice the Fed’s preferred target of 2 percent annual price growth and the strength of the U.S. economy has spurred some concerns that inflation could rise again if the Fed eases up.
But some economists and lawmakers fear further Fed rate hikes could drive the economy into recession, especially given how long higher rates could take to trickle through the economy.