Fed Officials Less Confident On The Need For More Rate Hikes, Minutes Show

• Federal Reserve officials were divided at their last meeting over where to go with interest rates, with some members seeing the need for more increases while others expected a slowdown in growth to remove the need to tighten further, minutes released Wednesday showed.
• Essentially, the debate came down to two scenarios. One that was advocated by “some” members judged that progress in reducing inflation was “unacceptably slow” and would necessitate further hikes. The other, backed by “several” FOMC members, saw slowing economic growth in which “further policy firming after this meeting may not be necessary.”
• While the future expectations differed, there appeared to be strong agreement that a path in which the Fed has hiked rates 10 times for a total of 5 percentage points since March 2022 is no longer as certain.
• FOMC officials also spent some time discussing the problems in the banking industry that have seen multiple medium-sized institutions shuttered. The minutes noted that members are ready to use their tools to make sure the financial system has enough liquidity to cover its needs. At the March meeting, Fed economists had noted that the expected credit contraction from the banking stresses likely would tip the economy into recession.
• They repeated that assertion at the May meeting, though they noted that if credit tightness abated, that would be an upside risk for economic growth. The minutes noted that the scenario for less impact from banking is “viewed as only a little less likely than the baseline.”
• Chair Jerome Powell weighed in last week, providing little indication he’s thinking about rate cuts though he said that the banking issues could negate the need for increases.

(Source: CNBC)