Federal Reserve officials reckoned at their meeting early this month that they had more work ahead to make monetary policy sufficiently restrictive to tame inflation, minutes from the central bank conclave showed Wednesday.
Most Federal Reserve officials agreed that the Fed should reduce the size of its interest rate hike from half a percentage point in December to a quarter of a point. A few, however, said they supported or would have supported a bigger hike.
“A few participants stated that they favored raising the target range for the federal funds rate 50 basis points at this meeting or that they could have supported raising the target by that amount. The participants favoring a 50-basis point increase noted that a larger increase would more quickly bring the target range close to the levels they believed would achieve a sufficiently restrictive stance, taking into account their views of the risks to achieving price stability in a timely way,” the minutes reported.
Fed officials were in agreement that a restrictive policy stance would need to be maintained “until the incoming data provided confidence that inflation was on a sustained downward path to 2 percent, which was likely to take some time.”
Officials expressed concern that if the Fed did not tighten enough, inflation could gather steam once again.
“A number of participants observed that a policy stance that proved to be insufficiently restrictive could halt recent progress in moderating inflationary pressures,” the minutes said.
The meeting took place before a spate of data indicated that consumer price increases picked up in January and the conditions in the labor market tightened further, suggesting that inflation is not yet on “a sustained downward path.”