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Despite concerns about trade policy negatively impacting the economy, members of the Federal Open Market Committee (FOMC), the policy-setting arm of the Federal Reserve, saw enough positives to support their decision to raise rates at the committee's June meeting, according to meeting minutes released yesterday.

The minutes indicated that most members are concerned that "uncertainty and risks associated with trade policy" could have a negative effect on the economy, specifically business sentiment and investment spending. Contacts in the Federal Reserve Districts also expressed concerns about tariffs impacting manufacturing and service sectors.

However, members agreed that the labor market and economic activity had strengthened in recent months, which led to the committee's decision to increase the federal funds target rate by a quarter-point to a range of 1.75 to 2 percent.

In addition, data presented during the June meeting revealed above-trend GDP growth resulting from higher consumer spending, a strong labor market and stimulative tax policies, among others. Overall inflation and core inflation, which excludes food and energy prices, over a 12-month period had also moved close to 2 percent.

"Overall, the tone of the minutes from the FOMC's June meeting was hawkish," said NAFCU Chief Economist and Vice President of Research Curt Long. "While due attention was paid to rising tariffs and the possibility of a yield curve inversion, the committee still views the risks to its outlook as being balanced. The committee seems focused on continuing the present pace of rate hikes through 2019 or even into 2020."

The committee previously raised the federal funds target rate at the end of its March meeting. The FOMC will meet again July 31-Aug. 1.