The latest meeting minutes released by the U.S. Federal Reserve show that the central bank is
considering adopting “more restrictive” policies to lower inflation even if it means slowing the
American economy.
Fed members said their July policy meeting will result in another 50 or 75-basis point rise in
interest rates, which would be on top of a 75-basis point increase in June.
Raising its benchmark interest rate by three-quarters of a percentage point in June was needed
to help lower inflation that is running at its highest levels since 1981, the Fed minutes said,
adding that the central bank plans to continue raising rates until inflation gets back to its 2%
target.
Officials at the June14 and 15 meeting said that they needed to raise interest rates by 75-basis
points to assure markets and the public that they are serious about lowering inflation.
The rising interest rates come as the U.S. economy shows signs of faltering. Gross domestic
product (GDP) in the U.S. during this year’s first quarter fell 1.6% and is on track to decline
2.1% in the second quarter, according to Fed economic data. That would put the American
economy in a recession, which is defined as two consecutive quarters of negative growth.
Federal Reserve officials at the June meeting expressed optimism about the longer-term
prospects for the U.S. economy, although they lowered their GDP forecast for this year to 1.7%
from a previous estimate of 2.8%.
