MNI: Fed Sees July Rate Hike Of 75BPS Or 50 BPS, Minutes Show

Federal Reserve officials agreed at their June meeting, when they decided to raise interest rates by an unusually sharp 75 basis points, that another rate hike of either 75 basis points or 50 basis points was likely at the upcoming July meeting, minutes released Wednesday showed. 

"Participants judged that an increase of 50 or 75 basis points would likely be appropriate at the next meeting," the minutes said. 

The report offered no indication that officials see inflation as having peaked, and made no mention of recession prospects despite growing fears that one might be looming -- although it did acknowledge risks to growth.

"Members remarked that they remain highly attentive to the upside risks to inflation and would be nimble in responding to incoming data and the evolving outlook," the report said.  "Most participants assessed that the risks to the outlook for economic growth were skewed to the downside."

The U.S. central bank is fighting an inflation surge it worries could get out of control if consumers' inflation expectations spike sharply, particularly over a longer horizon.

The Fed's preferred inflation measure, the PCE inflation index, was stuck at 6.3% in May, more than three times above the central bank's official 2% goal. The CPI is even more eye-popping, surging 8.6% in the year to May.  

"Many participants judged that a significant risk now facing the committee was that elevated inflation could become entrenched if the public began to question the resolve of the Committee to adjust the stance of policy as warranted," the minutes said.

The June rate hike brought official borrowing costs to a range of 1.5% to 1.75%.  Officials say they are committed to raising interest rates expeditiously to more neutral levels, which policymakers think is somewhere around 2.5%.  

"Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist," the Fed minutes said.