WASHINGTON: US central bankers last month flagged the concern that sky-high inflation could become persistent and reiterated their willingness to continue raising interest rates to tamp down price pressures, according to the minutes of the latest policy meeting released Wednesday.
The Federal Reserve last month implemented the most aggressive interest rate increase in nearly 30 years, as policymakers cited worries that price pressures had shown no signs of easing, according to the record of the June 14-15 meeting.
The members of the Fed’s policy-setting Federal Open Market Committee raised the benchmark borrowing rate three-quarters of a point and at the time said another similar increase was possible later this month, after data showing consumer prices surged 8.5 percent in the 12 months to May — the highest in more than four decades.
Officials were concerned “that inflation pressures had yet to show signs of abating,” which a number saw as further evidence “inflation would be more persistent than they had previously anticipated,” the minutes said.
And many policymakers said there was “a significant risk... that elevated inflation could become entrenched if the public began to question the resolve of the Committee.”
But the minutes made clear the officials are resolved to continue efforts to cool the economy at least through the end of the year.
With the high prices for food, energy, housing and other goods squeezing American families, Fed officials “stressed that appropriate firming of monetary policy, together with clear and effective communications, would be essential in restoring price stability.”
Still, there remains a risk inflation will continue to accelerate amid the uncertainty surrounding how long the effect of the Russian invasion of Ukraine and Covid-19 lockdowns in China will continue, as those factors have exacerbated price pressures, the report said.
Officials acknowledged they might have to be even more aggressive in tightening monetary policy “if elevated inflation pressures were to persist.”