The leanest readout of a Federal Reserve policy meeting in years still made clear how concerned U.S. central bank officials remain about inflation and how they will likely react with interest rate hikes if it remains too high much longer, putting emphasis on a coming spate of price reports against a backdrop of renewed hostilities in the Middle East. The minutes of the June 16-17 Federal Open Market Committee meeting showed an even divide between one body of policymakers largely content to leave rates where they are and another viewing higher borrowing costs as the appropriate path.
The crux of the readout, released on Wednesday, was around a discussion of scenarios and possible policy responses, the clearest of which appeared to be that in an adverse scenario of persistent, broadening inflation, most Fed officials would be ready to respond with higher rates, while in a favorable scenario of falling inflation, most of them would be happy to hold rates steady or eventually cut them. "I do think (the minutes) showed that richness of these scenarios," New York Fed President John Williams said on Thursday during a conference at his regional Fed bank. "There are certain parts of the inflation outlook that are probably maybe a little bit more benign, say on the tariffs, maybe on the energy prices, depending how that plays out. But there are other scenarios where inflation is more persistent and stays higher, which would ... call for tighter monetary policy. I think that's the right way to think about it."
