Federal Reserve officials moved unanimously to raise interest rates at the central bank’s policy meeting earlier this month despite significant debate at the time over whether pausing tightening efforts would instead be the more prudent move.
Now, minutes from the Fed’s May 2-3 meeting could offer clues as to just how seriously officials considered holding interest rates steady and whether any members of the Federal Open Market Committee spoke out in favor of a pause.
The latest Fed minutes, which will be released Wednesday afternoon, will shed new light on the internal discussions that took place during the most recent FOMC meeting, when officials voted to raise interest rates by a quarter-point to a level of 5-5.25%. Though they’re released several weeks after each meeting, the Fed minutes are always closely watched for clues as to how central bank officials are feeling, and where monetary policy is likely headed over the next several weeks or months.
Leading up to the May meeting, some of the more dovish members of the committee appeared to be leaning against the idea of further policy tightening, arguing that the fallout from a string of bank failures in the spring would have a similar effect on financial conditions as rate hikes do. That would mean, in turn, that the Fed would not have to raise rates as aggressively as it had once indicated.
But Fed Chairman Jerome Powell knocked down those concerns when he announced the quarter-point increase, emphasized that the banking system was sound, and highlighted his view that the economy might be able to avert recession.
At the time, the Fed also hinted that a pause might be coming, though Powell made clear in his postmeeting press conference that the central bank would continue to watch the data and would not hesitate to tighten rates further if needed. The minutes will be closely parsed for clues as to what specifically the central bank will be looking for in the economic data moving forward as the numbers decide whether and when to stop tightening.
The Fed staff’s economic outlook will also be of particular interest in the minutes. The minutes from the March 21-22 meeting revealed that in the immediate aftermath of the failure of Silicon Valley and Signature Banks, Fed staff projected a mild recession beginning later this year.
When asked during his May postmeeting press conference whether that forecast had been revised at all, Powell largely declined to offer insight.
“I wouldn’t want to characterize the staff’s forecast for this meeting,” he told reporters. “We’ll leave that to the minutes.”
The Fed will release the minutes on Wednesday at 2 p.m.