Decision to pause US interest rate increase not unanimous, Fed minutes show

Central bank still expects to raise rates later this year

Federal Reserve Chairman Jerome Powell speaks before a US House of Representatives committee in Washington. Reuters

Minutes released by the Federal Reserve on Wednesday showed that not all of the central bank's policymakers found it appropriate to skip raising US interest rates last month.

“Almost all participants judged it appropriate or acceptable to maintain the target range for the federal funds rate at 5 per cent to 5.25 per cent,” minutes from the Fed's June 13-14 meeting show.

Some policymakers considered supporting a rate increase of 25 basis points “or that they could have supported such a proposal” during the meeting.

Those in support of a June interest rate increase cited the US labour market and few clear signs that inflation was on a downwards trajectory to the Fed's long-term 2 per cent goal.

A key metric favoured by the Fed showed last week that inflation increased 3.8 per cent on an annual basis in May, down from 4.3 per cent the month prior.

But Fed officials ultimately paused an interest rate increase last month, breaking a streak of 10 consecutive increases.

“Most of these participants observed that leaving the target range unchanged at this meeting would allow them more time to assess the economy’s progress towards the committee’s goals of maximum employment and price stability,” the minutes showed.

“The economy was facing headwinds from tighter credit conditions, including higher interest rates, for households and businesses, which would likely weigh on economic activity, hiring, and inflation, although the extent of these effect remained uncertain.”

Even with rates unchanged, Fed officials still anticipate additional tightening to come this year.

Projections released by the Fed anticipate that the Fed's target interest rate would reach 5.6 per cent by year's end.