Fed Officials See ‘Upside Risks’ To Inflation Possibly Leading To More Rate Hikes, Minutes Show

• Federal Reserve officials expressed concern at their most recent meeting about the pace of inflation and said more rate hikes could be necessary in the future unless conditions change, minutes released Wednesday from the session indicated.
• That discussion during a two-day July meeting resulted in a quarter percentage point rate hike that markets generally expect to be the last one of this cycle. However, discussions showed that most members worry that the inflation fight is far from over and could require additional tightening action from the rate-setting Federal Open Market Committee.
• That latest increase brought the Fed’s key borrowing level, known as the federal funds rate, to a range targeted between 5.25%-5%, the highest level in more than 22 years. 
• “Participants generally noted a high degree of uncertainty regarding the cumulative effects on the economy of past monetary policy tightening,” the minutes said.
• There was also a concern over problems with commercial real estate. Specifically, officials cited “risks associated with a potential sharp decline in Commercial Real Estate (CRE) valuations that could adversely affect some banks and other financial institutions, such as insurance companies, that are heavily exposed to CRE. Several participants noted the susceptibility of some nonbank financial institutions” such as money market funds.
• Recent data shows the Fed has made good progress in decreasing inflation, however, they remain cautious as policymakers in the 1970s declared victory too soon on double-digit inflation by backing off quickly when prices showed tentative signs of backing off.

(Source: CNBC)