Fed catches speed increases ahead, but at a slower speed, meeting minutes offer

July 7, 2023: On Wednesday, according to minutes released, almost all Federal Reserve officials at their June summit indicated further tightening is likely, if at a slower rate than the rapid-fire rate increases that had characterized monetary policy since early 2022.

Policymakers chose against a rate rise amid concerns over economic growth, even though most members think further hikes are coming. Citing the lagged impact of policy and other concerns, they saw room to skip the June session after enacting ten straight rate increases.

Officials felt that leaving the target range unchanged at this meeting would allow them more time to assess the economy’s progress toward the Committee’s maximum employment and price stability goals.

Federal Open Market Committee members voiced hesitance over a multitude of factors.

They stated that a brief pause would give the committee time to assess the impacts of the hikes, which have totaled five percentage points, the most aggressive moves since the early 1980s.

“The economy was facing headwinds from tighter credit conditions, including higher interest rates, for households and businesses, which would likely weigh on economic activity, hiring, and inflation, although the extent of this effect remained uncertain,” the minutes said.

The unanimous decision not to raise rates came in “consideration of the significant cumulative tightening in the stance of monetary policy and the lags with which policy affects economic activity and inflation.”

Markets showed little reaction to the release. The Dow Jones Industrial Average was off about 120 points, nearing the final hour of trading, while Treasury yields were sharply higher.