Fed sees interest rate hikes continuing until inflation eases substantially, minutes show

The July meeting of the Federal Reserve indicated that they wouldn't consider pulling back on their rate hikes until inflation came down.

policymakers expressed resolve to bring down inflation that is running well above the Fed's desired 2% level during a meeting in which the central bank approved a 0.75 percentage point rate hike

They didn't give any specific guidance for future increases, but they would be watching the data closely. At the September meeting, market pricing is for a half point rate hike.

The neutral level for the federal funds rate was noted by meeting participants. More rate hikes are likely to come according to some officials.

The minutes stated that moving to a restrictive stance of policy was needed to meet the Committee's mandate to promote maximum employment and price stability.

According to the document, once the Fed gets comfortable with its policy stance, it could start to take its foot off the policy brake. That idea has helped push the stock market higher.

As the stance of monetary policy tightened further, it likely would be appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation, according to the minutes.

Some participants said it would be appropriate to maintain that level for some time to make sure that inflation was on a path back to 2 percent.

Incoming data would be used to make future rate decisions. The minutes stressed the Fed's determination to bring down inflation and said there were few signs that inflation was abating.

Policy would probably take some time before it had a meaningful impact.

There was no change in the consumer price index for July. The personal consumption expenditures price index rose 1% in June and was up 6.8% compared to the same month a year ago.

Any wavering from the Fed would make the situation worse.

If the public began to question the Committee's resolve to adjust the stance of policy sufficiently, there would be a significant risk to the Committee. It would be difficult to return inflation to 2 percent and the costs of doing so would be much higher.

The Fed hiking three-quarters of a point at successive meetings has caused markets to rally on hopes that the central bank might slow the pace of increases.

The recent bottom in the stock market has resulted in an increase in the index.

The importance of not being tied to forward guidance on moves and instead following the data was underscored by the minutes.

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