According to an account of their most recent meeting, Federal Reserve officials discussed the need to keep interest rates low for a while in order to control inflation.
The minutes from the meeting in which the US central bank raised its benchmark policy rate for the second month in a row indicated policymakers were intent on going ahead with monetary policy even though the economy is cooling down.
According to the minutes, officials noted that inflation had not improved and that the bulk of the effect of rate rises had not yet had a significant effect. Inflation is likely to stay high for a while.
Raising interest rates to the point where they act as a drag on economic growth was supported by officials.
The minutes noted that raising rates to such a level would allow the Fed to increase them even further if inflation ran higher than expected.
Once rates had been raised to the point where they were cooling down the economy, it would probably be appropriate to maintain that level to ensure that inflation was on a path back to the Fed's target.
The Fed is currently in the middle of its most aggressive cycle of monetary tightening since 1981. The US economy contracted for a second quarter in a row just a day after the rate increase was implemented.
In just four months, it has raised its benchmark policy rate from zero to 2.5%.
The federal funds rate is in line with estimates of a neutral policy setting when inflation is running at 2%, meaning that it stimulates neither nor restrains economic activity.
If a third 0.75 percentage point rate rise is needed at the next policy meeting in September, top officials are debating if the Fed can start implementing smaller increases at future meetings.
Jay Powell said at the press conference after the July announcement that it would be appropriate to slow the pace of increases.
Even though Powell didn't rule out another large increase in September, US stocks and other risky assets surged.
In recent weeks, the market has gathered steam, easing financial conditions for consumers and companies, and counteracting some of the effects of the Fed's tightening.
Some members of the Federal Open Market Committee and other Fed presidents have pushed back on the idea that the central bank will rein in its aggressive approach.
According to the minutes, Fed officials are increasingly of the opinion that there might need to be job losses and an economic downturn if the central bank is to stamp out inflation with a moderate increase in unemployment.
The risk that the Fed could tighten monetary policy too aggressively was warned of by many participants.
The president of the San Francisco Fed told the Financial Times that the central bank is not done fighting inflation. She said that there needs to be clear evidence that consumer price growth is slowing before considering a let up in the rate-rising cycle.
There was no increase in consumer price growth between June and July and a slower annual rate. The US economy added 528,000 jobs in July according to the previous week's jobs report.
She supports a half-point rate rise next month, but is open minded about another 0.75 percentage point adjustment.
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