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The Federal Open Market Committee (FOMC) Wednesday released minutes from its July meeting, in which participants judged that inflation would respond to monetary policy tightening but would likely stay uncomfortably high for some time. 

In their discussion of current economic conditions, participants noted that recent indicators of spending and production had softened. However, job gains have been robust in recent months, and the unemployment rate has remained low. 

Participants agreed that a return of inflation to the 2 percent objective was necessary for sustaining a strong labor market, while noting that it would likely take more time for inflation to move down to the Committee's objective. 

“The minutes from the FOMC’s July meeting were, on the whole, hawkish,” said NAFCU Chief Economist and Vice President of Research Curt Long. “There was significant space devoted to assurances that the committee is laser-focused on getting inflation back to target, even if it causes a slowdown in economic growth or in the labor market.” 

In discussing potential policy actions at upcoming meetings, participants continued to anticipate ongoing increases in the target range for the federal funds rate, since inflation remains well above the FOMC’s objective. They judged that moving to a restrictive stance of policy was required to meet their legislative mandate to promote maximum employment and price stability. 

With the committee’s need to tighten inflation, Long added that “NAFCU continues to expect a third consecutive 75-basis point rate hike when the FOMC meets again in September.”