Federal Reserve minutes: Policymakers saw a longer path to rate cuts

abcnews.go.com:

After several unexpectedly high inflation readings, Federal Reserve officials concluded at a meeting earlier this month that it would take longer than they previously thought for inflation to cool enough to justify reducing their key interest rate, now...

WASHINGTON — After several unexpectedly high inflation readings, Federal Reserve officials concluded at a meeting earlier this month that it would take longer than they previously thought for inflation to cool enough to justify reducing their key interest rate, now at a 23-year high.

Minutes of the May 1 meeting released Wednesday showed that officials also debated whether their key rate was exerting enough of a drag on the economy to further slow inflation. Many officials noted that they were uncertain how restrictive the Fed's rate policies are, the minutes said. That suggests that it wasn't clear to the policymakers whether they were doing enough to restrain price growth.

High interest rates “may be having smaller effects than in the past,” the minutes said. Economists have noted that many American homeowners, for example, refinanced their mortgages during the pandemic and locked in very low mortgage rates. Most large companies also refinanced their debt at low rates, which has blunted the impact of the Fed's 11 rate hikes in 2022 and 2023.

Such concerns have raised speculation that the Fed could consider raising, rather than cutting, its benchmark rate in the coming months. Indeed, the minutes noted that “various" officials “mentioned a willingness” to raise rates if inflation accelerated.

But at a news conference just after the meeting, Chair Jerome Powell said it was “unlikely” that the Fed would resume raising its benchmark rate — a remark that temporarily