Federal Reserve officials split over future path for interest rate hikes

investmentweek.co.uk:

After hiking interest rates to their highest in 22 years last month, the central bank’s Federal Open Market Committee minutes revealed cracks in the consensus among members.

After hiking interest rates to their highest level in 22 years last month, the central bank's Federal Open Market Committee minutes revealed cracks in the consensus among members.

Despite the committee unanimously backing the 25bps rate hike last month, the minutes revealed that some meeting participants, which includes nonvoting members, opposed the recent hike, instead arguing the Fed should have held steady and observe how previous hikes are affecting the economy.

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«Participants generally noted a high degree of uncertainty regarding the cumulative effects on the economy of past monetary policy tightening,» the minutes said.

The uncertainty of the effects and passthrough time of previous hikes was an overarching theme of the minutes, as Fed officials attempt to balance tackling inflation while avoiding «overtightening».

«A number of participants judged that, with the stance of monetary policy in restrictive territory, risks to the achievement of the committee's goals had become more two sided, and it was important that the committee's decisions balance the risk of an inadvertent overtightening of policy against the cost of an insufficient tightening,» the minutes said.

Nevertheless, there was a strong consensus that inflation was still «unacceptably high», and officials would be closely watching further evidence to see if inflation was «clearly on a path» back to the 2% target.

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Market odds of a hike at