Fed Minutes Show Officials Were Wary About Inflation at May Meeting

Federal Reserve officials were wary about the recent lack of progress on inflation and remained willing to lift interest rates if conditions made it necessary as of their two-day meeting that ended on May 1.

Minutes from the gathering, released Wednesday, showed that “many” officials expressed uncertainty about how much today’s interest-rate setting — 5.3 percent, up sharply from near zero in early 2022 — was weighing on the economy.

Officials have been clear that they expect to leave interest rates unchanged for now, hoping that they are tapping the brakes on economic growth enough to quash inflation over time. And central bankers have repeatedly emphasized that they expect the next move on interest rates to be a reduction, not an increase.

But policymakers have stopped short of ruling out a future rate increase, allowing that it’s a possibility if inflation proves surprisingly rapid. The minutes underscored that caveat.

“Various participants mentioned a willingness to tighten policy further” if needed, the release showed.

Stock indexes fell after the release of the minutes, as investors fretted that the Fed’s wariness about inflation could keep interest rates higher.

Fed officials have received some comforting news since their last gathering: Inflation cooled slightly in April, a sign that the surprisingly stubborn price pressures at the beginning of the year will not necessarily become a permanent trend. Policymakers have continued to emphasize that they are happy to keep interest rates at today’s levels for an extended period as they wait to make sure that price increases are fully decelerating.

“We’re just going to need to accumulate more information,” Loretta Mester, the president of the Federal Reserve Bank of Cleveland, said in an interview this week at the Federal Reserve Bank of Atlanta’s Financial Markets Conference in Florida. She noted that improvements to supply chains lowered inflation quite a bit last year and said that was unlikely to repeat itself this year.

When it comes to stamping out price increases enough to lower rates, “I do think it’s going to take longer than I had thought,” Susan Collins, the president of the Federal Reserve Bank of Boston, said in an interview, also in Florida. “I think policy is restrictive, but I think it’s only moderately restrictive.”