Pace of future Fed hikes depends on data, no evidence inflation subsiding, July

The Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 27, 2019. REUTERS/Brendan McDermid/File Photo

WASHINGTON, Aug 17 (Reuters) – Federal Reserve officials said last month that the pace of future interest rate increases would hinge on incoming data, with some saying rates would need to stay at a “sufficiently restrictive level” for “some time” in order to control inflation, according to the minutes of the July 26-27 session.

Participants at the session said it may take longer than anticipated for inflation to dissipate, and that a slowdown in aggregate demand engineered by the central bank “would play an important role in reducing inflation pressures,” said the minutes, which were released on Wednesday.

The minutes did not indicate clear bias among Fed officials for either a smaller rate increase of half a percentage point or a third consecutive 75-basis-point hike at the upcoming Sept. 20-21 meeting, but a restatement that the behavior of inflation and the economy in general would drive the decision.

The Fed has lifted its benchmark overnight interest rate by 225 points this year to a target range of 2.25% to 2.50% as part of an effort to control inflation, which is running at a four-decade high and hovering, by the Fed’s preferred measure, at more than three times the 2% target.

The central bank is widely expected to hike rates next month by either 50 or 75 basis points.

For the Fed to scale back its rate hikes, inflation reports due to be released before the next meeting would likely need to confirm that the pace of price increases was declining.

Reporting by Howard Schneider; Editing by Paul Simao

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