Washington, Aug 18 US Federal Reserve officials indicated that further rate hikes could follow as they saw "little evidence" that inflation pressures were subsiding, according to the minutes of the Fed's latest policy meeting.
"Uncertainty about the medium-term course of inflation remained high, and the balance of inflation risks remained skewed to the upside, with several participants highlighting the possibility of further supply shocks arising from commodity markets," revealed the minutes on Wednesday of the Federal Open Market Committee (FOMC)'s July 26-27 meeting.
The consumer price index (CPI) has remained over 8 per cent since March, and the July figure surged 8.5 per cent from a year ago, down from the previous month's fresh four-decade high but still at elevated level.
Fed officials judged that inflation would respond to monetary policy tightening and the associated moderation in economic activity with a delay and would likely stay "uncomfortably high" for some time.
In light of elevated inflation and the upside risks to the outlook for inflation, participants believed that moving to "a restrictive stance" of the policy rate in the near term would also be appropriate from a risk-management perspective.
"Participants judged that a significant risk facing the Committee was that elevated inflation could become entrenched if the public began to question the Committee's resolve to adjust the stance of policy sufficiently," the minutes said.
"If this risk materialized, it would complicate the task of returning inflation to 2 per cent and could raise substantially the economic costs of doing so," it added.
At its July meeting, the Fed imposed another 75-basis-point rate hike, the largest back-to-back rate increase in decades, in a bid to tamp down rampant inflation.
The Fed has already hiked interest rates by 225 basis points since March this year, and is set to continue its aggressive path, raising the risks for a possible recession.
The Fed minutes showed that indicators of spending and production suggested that the second quarter of this year had seen a "broad-based softening" in economic activity, including a slower growth in consumer spending and notably weakening housing activity.
Despite a robust labour market, many participants also noted that there were some tentative signs of a softening outlook for the labour market: increases in weekly initial unemployment insurance claims, reductions in quit rates and vacancies, slower growth in payrolls than earlier in the year, and reports of cutbacks in hiring in some sectors.
"A moderation in labour market conditions would likely involve a decline in the number of job openings as well as a moderate increase in unemployment from the current very low rate," the minutes added.
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