Federal Reserve officials were split at their last policy meeting on whether to pause interest rates upcycle or keep alternatives open due to uncertainties about the economic outlook.
Minutes released on Wednesday showed that while the decision to raise the Fed’s benchmark rate by a quarter percentage point was unanimous, there was disagreement regarding the next move, with a lean toward less aggressive policy.
“Participants generally expressed uncertainty about how much more policy tightening may be appropriate,” according to minutes from the early May meeting of the Federal Open Market Committee (FOMC) on policy decisions.
At the meeting in early May, “several” FOMC members said that a further rate increase after the prior meeting might not be necessary if economic growth turns out to be weaker than expected.
However, “some” Fed members believed more rate hikes were necessary since they anticipated that getting inflation back down to the Fed’s 2% target would be a gradual process.
The Federal Reserve now looks to be shifting toward a more data-dependent strategy, wherein a wide variety of indicators will be considered before deciding whether to continue the rate-hiking cycle.
