Three voting members of the Federal Open Market Committee preferred to raise rates by a quarter point.
The Federal Reserve left interest rates unchanged for the fifth straight meeting on July 29.
Nine members of the Federal Open Market Committee—also known as the FOMC—agreed to leave the chief policy rate in the current target range of between 3.5 percent and 3.75 percent.
Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan dissented and preferred to raise the federal funds rate by a quarter point.
“Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little,” the post-meeting statement reads.
Inflation continues to be above the central bank’s 2 percent target, “reflecting supply shocks that have driven price increases in certain sectors, including energy.”
“The Committee will deliver price stability,” it reads.
It was once again a short statement, coming in below 200 words for the second consecutive meeting.
But although the Fed refrained from taking policy action, Fed Chair Kevin Warsh insisted that the Fed is ready to take action to combat inflation.
“I understand the desire for rolling forecasts and commentary from this committee, but for our part, we need to observe market reaction to developments direct and unfiltered,” Warsh said. “I want to stress, of course, that decisions by this committee matter a great deal, and where necessary and appropriate, we will not hesitate to act.”
He also said he would describe it not as a “pause” but rather as the Fed’s doing its “own homework” to review the big questions facing the central bank.
June’s inflation data came in better than expected amid stabilizing global energy markets. With the reacceleration in oil and gas prices, the July and possibly August numbers may not fuel optimism that inflation is decelerating and returning to pre-war levels.
The Fed’s playbook suggests that monetary policymakers look through oil supply shocks and concentrate on underlying inflation trends.
Minutes from June’s policy meeting indicate that tighter monetary policy would be appropriate.
“Many other participants, however, assessed that the appropriate level of the federal funds rate would be above the current target range at the end of this year,” the meeting summary reads. “Participants noted that their future policy actions would depend on incoming information.”
Core inflation, which strips out volatile energy and food categories, has been tamer. For example, the 12-month headline consumer inflation rate is firmly above 3 percent, but core is at 2.6 percent.
A fresh batch of June’s inflation figures will be released on July 30: The Fed’s preferred personal consumption expenditures (PCE) price index for June and trimmed-mean PCE.
“We have begun a new chapter, and we understand that the five-plus years of inflation above target cannot be cured in nine weeks, or by a single month of modest price decreases,” he said. “This Fed will not waver. Our credibility rests on performing our duties and delivering on our responsibilities.”
By Andrew Moran
