Federal Reserve officials in June emphasized the need to fight inflation even if it meant slowing an economy that already appears on the brink of a recession, according to meeting minutes released Wednesday.
Members said the July meeting likely also would see another 50- or 75-basis point move. A basis point is one one-hundredth of 1 percentage point.
“In discussing potential policy actions at upcoming meetings, participants continued to anticipate that ongoing increases in the target range for the federal funds rate would be appropriate to achieve the Committee’s objectives,” the minutes stated. “In particular, participants judged that an increase of 50 or 75 basis points would likely be appropriate at the next meeting.”
In raising benchmark borrowing rates by three-quarters of a percentage point, central bankers said the move was necessary to control cost-of-living increases running at their highest levels since 1981.
“Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist,” the document said.
They acknowledged that the policy tightening likely would come with a price.
“Participants recognized that policy firming could slow the pace of economic growth for a time, but they saw the return of inflation to 2 percent as critical to achieving maximum employment on a sustained basis,” the meeting summary stated.
The move to hike rates by 75 basis points followed an unusual sequence in which policymakers appeared to have a last-minute change of heart after saying for weeks that a 50 basis point move was almost certain.
Following data showing consumer prices running at an 8.6% 12-month rate and inflation expectations rising, the rate-setting Federal Open Market Committee chose the more stringent path.