Fed Officials Avoided a Victory Lap at July Meeting

Federal Reserve officials welcomed a recent slowdown in inflation at their July meeting, minutes released on Wednesday showed, but they stopped short of declaring victory. Instead, officials stressed that inflation remained “unacceptably” high and “most” saw continued risks of higher inflation that might prod the central bank to raise interest rates further.

Fed policymakers raised interest rates to a range of 5.25 to 5.5 percent on July 26, the highest since 2001. Officials have lifted borrowing costs sharply over the past 17 months — first adjusting them rapidly, and more recently at a slower pace — to slow the economy. By making it more expensive to borrow and spend, they have been hoping to cool demand and wrangle inflation.

But given how much rates have risen in recent months and how much inflation has recently cooled, investors have been questioning whether policymakers are likely to lift borrowing costs again. Inflation eased to 3.2 percent in July on an overall basis, down sharply from a high of more than 9 percent in mid-2022.

Officials at the Fed meeting did welcome recent progress on slowing price increases, but many of them stopped short of signaling that it could prompt them to back down on their campaign to cool the economy. The minutes showed that “a couple” of the Fed’s policymakers did not want to raise interest rates in July, but most supported the move — and suggested that there could still be further adjustment ahead.

“Participants noted the recent reduction in total and core inflation rates” but stressed that “inflation remained unacceptably high and that further evidence would be required for them to be confident that inflation was clearly on a path” back to normal, the minutes showed.

With inflation still unusually high and the labor market strong, “most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy,” the minutes added.