While some US Federal Reserve officials lifted their benchmark federal-funds rate last July by a quarter-percentage-point to a range between 5.25% and 5.5%, the highest level in 22 year, the minutes of the July policy meeting, revealed that there is concern among some Federal Reserve officials that a significant increase in interest rates will lead to counterproductive and undesirable results.
The Wall Street Journal reported that "most Federal Reserve officials backed an increase in interest rates last month but some saw rising risks that they might raise rates too high, underscoring growing caution about further increases." The minutes of the July meeting indicated that Federal Reserve officials have become more cautious about the need to continue raising interest rates despite their unanimous support for a record interest rate increase last month.
The Wall Street Journal said that "minutes of the July policy meeting, released Wednesday, said some officials thought the risks of raising rates too much versus too little had become more two-sided, and it was important that the committees decisions balance the risk of an inadvertent overtightening of policy against the cost of an insufficient tightening." The newspaper quoted Boston Fed President Susan Collins who said last week, "the risks of doing too much have absolutely increased and are much closer to balance, relative to the risks of not doing enough." However, officials still saw significant risks that inflation might not fall as much as they expect, which could require them to raise rates again this year, the minutes said. Those risks include stronger economic growth, which might increase inflation rates, and the reversal of recent supply-chain improvements or declines in commodity prices, which have been largely responsible for the slowdown in inflation. (MORE)
Source: Qatar News Agency