Top Federal Reserve officials now see entrenched inflation as a “significant risk” to the US economy and fear even tighter monetary policy will be needed if price growth exceeds their expectations, according to an account of their most recent meeting.
The minutes of the June meeting, at which the Fed delivered the first 0.75 percentage point rate rise since 1994, also showed policymakers now support raising interest rates to the point at which economic activity is restrained, with the possibility they could become “even more restrictive” if warranted by the data.
“Many participants judged that a significant risk now facing the committee was that elevated inflation could become entrenched if the public began to question the resolve of the committee to adjust the stance of policy as warranted,” the minutes said.