Minutes from the Federal Reserve's July 28-29 meeting, released Wednesday, showed that many officials believed policy tightening would likely be necessary if inflation did not decline.
"Many participants assessed that policy tightening would likely be necessary if inflation did not decline," the summary stated. "Some participants commented that financial conditions might not currently be sufficiently restrictive to facilitate a return of inflation to 2 percent."
The Federal Open Market Committee ultimately voted 9-3 to keep the federal funds rate in a range between 3.5%-3.75%, where it has stood all year. The overnight borrowing rate serves as a guidepost for consumer debt including mortgages, credit cards and auto loans. The three dissenters, all regional presidents — Beth Hammack of Cleveland, Lorie Logan of Dallas and Neel Kashkari of Minneapolis — favored a quarter percentage point increase, judging it would "likely help forestall the need for a steeper and potentially more costly sequence of tightening moves at a later stage."
Since the meeting, data has mostly shown modest monthly price increases, though major indicators remain well above the Fed's 2% target. The personal consumption expenditures price index fell 0.1% in June, while the annual rate stood at 3.7%. Meanwhile, nonfarm payrolls fell by 23,000 in July even as unemployment dropped to 4.1%, largely due to a shrinking labor force.
