Central bank minutes
Fed leaves door open for more rate hikes
08/16/2023 9:22 p.m
The US Federal Reserve recently raised interest rates by a quarter of a percentage point. The minutes now show that the step was hotly debated. Another rate hike is possible in September, according to Fed Chair Powell. However, there is no indication of this in the document.
At its most recent interest rate meeting, the US Federal Reserve controversially discussed the pros and cons of further interest rate hikes. This emerges from the minutes of the meeting at the end of July, which were made public.
The Fed unanimously decided to raise interest rates. But some participants had spoken the word for an interest rate break. Different arguments were put forward when discussing whether or not interest rate reins should be tightened further after the July meeting. Most participants saw inflation as the main risk that could require further tightening. But warning voices emphasized that potential dangers such as economic weakness and rising unemployment should be included in the risk assessment.
“This included the possibility that the macroeconomic impact of the tightening of financing conditions since the beginning of last year could be larger than expected,” according to the Fed’s transcripts from the FOMC, which is responsible for interest rate policy. However, Fed chiefs agreed that the level of uncertainty remained high. Future interest rate decisions should be made dependent on the overall picture of the incoming data.
The Fed raised interest rates by a quarter of a percentage point at the July meeting – to a range of 5.25 to 5.50 percent. It was the eleventh interest rate hike since the beginning of 2022 with which the central bank is fighting inflation. According to Fed Chair Jerome Powell, another hike is possible in September if the data situation calls for it. However, a break is also conceivable. Consumer prices rose 3.2 percent in July after 3.0 percent in June. However, experts had a slightly stronger increase to 3.3 percent on the slip.