A majority of Commissioners at the U.S. Central Bank, the Federal Reserve (Fed), indicated that the benchmark interest rate should be raised if inflation continues to exceed 2%.
In minutes of the Federal Open Market Committee (FOMC) meeting held on Apr. 28–29 and released on the 20th (local time), the Fed said, "A majority of participants, the Commissioners, emphasized that if inflation continues to run above 2%, some policy firming (rate hikes) would likely be appropriate."
It added, "To address this possibility, many participants, the Commissioners, preferred to remove language in the statement that hinted at an 'easing bias' regarding the Committee's future rate decisions."
The Fed also said, "The Commissioners generally noted that even core inflation has risen to levels above 2%, and, given the persistence of elevated inflation and the uncertain economic impact of the Middle East conflict, the Commissioners judged that it may be necessary to maintain the current restrictive policy stance longer than previously anticipated."
At last month's FOMC meeting, three officials—Lorie Logan, president of the Dallas Federal Reserve Bank, Beth Hammack, president of the Cleveland Fed, and Neel Kashkari, president of the Minneapolis Fed—voted to hold the benchmark rate at 3.50–3.75% annually but opposed language in the statement that suggested the possibility of rate cuts.
However, the minutes showed that the argument for raising rates if inflation exceeds the Fed's 2% target actually enjoyed substantial support and was the dominant view within the meeting.
Currently, the U.S. consumer price inflation rate surged to 3.8% as of April, the highest in three years, due to a spike in global oil prices following the Iran war. As a result, markets are forecasting not only that the Fed will find it difficult to pursue additional rate cuts, but also that the likelihood of initiating rate hikes within this year is growing.
Earlier, the Fed kept the benchmark rate at 3.50–3.75% annually at last month's meeting, but with four dissenting votes—the most since 1992—internal disagreements over the future direction of monetary policy became pronounced, observers said. The meeting was also the last FOMC chaired by Jerome Powell.