The Fed released the minutes of the Federal Open Market Committee (FOMC) meeting held on July 25-26. The minutes of the last meeting, in which the policy rate was raised by 25 basis points to a 22-year high of 5.25-5.50 percent, showed that the FOMC remained highly sensitive to inflation risks.
"With inflation still well above the FOMC's longer-term target and the labor market remaining tight, most participants continued to see significant upside risks to inflation that could require further tightening of monetary policy," the minutes said, noting that officials discussed various risk management issues that could have an impact on future policy decisions.
The minutes emphasized that officials agreed that economic activity was expanding at a moderate pace and that the US banking system was sound and resilient.
In the minutes, officials drew attention to the uncertainty regarding the lags in the effects of monetary policy on the economy and discussed the extent to which these effects were realized.
Officials said that inflation remained "unacceptably high" despite recent declines and emphasized that more evidence was needed to be confident that inflation was moving toward the target.
The minutes highlighted downside risks to economic activity and inflation, noting that the authorities considered the possibility that the cumulative tightening in monetary policy could lead to a sharper-than-expected slowdown in the economy and that the effects of tightening bank lending conditions could increase.
Source: Anadolu Agency