Fed Board, Report: Minutes of the FOMC, January 31 – February 1

Economic Conditions

“In their discussion of current economic conditions, participants noted that recent indicators pointed to modest growth in spending and production. Nonetheless, job gains had been robust in recent months, and the unemployment rate remained low. Inflation had eased some-what but remained elevated … Against this back-ground, participants continued to be highly attentive to inflation risks.”

“Some participants judged that recent economic data signaled a somewhat higher chance of continued subdued economic growth, with inflation falling over time to the Committee’s longer-run goal of 2 percent, although some participants noted that the probability of the economy entering a recession in 2023 remained elevated.”

Inflation

With inflation still well above the Committee’s longer-run goal of 2 percent, participants agreed that inflation was unacceptably high … Participants noted that inflation data received over the past three months showed a welcome reduction in the monthly pace of price increases but stressed that substantially more evidence of progress across a broader range of prices would be required to be confident that inflation was on a sustained downward path.”

Fed Funds

Against this backdrop, and in consideration of the lags with which monetary policy affects economic activity and inflation, almost all participants agreed that it was appropriate to raise the target range for the federal funds rate 25 basis points at this meeting. Many of these participants observed that a further slowing in the pace of rate increases would better allow them to assess the economy’s progress toward the Committee’s goals

A few participants stated that they favored raising the target range for the federal funds rate 50 basis points at this meeting or that they could have supported raising the target by that amount. The participants favoring a 50-basis point increase noted that a larger increase would more quickly bring the target range close to the levels they believed would achieve a sufficiently restrictive stance, taking into account their views of the risks to achieving price stability in a timely way.