Federal Reserve officials were divided at their last meeting as to whether or not another rate hike was needed to slow the economy, according to minutes from the central bank's May policymaking meeting, released Wednesday afternoon.
The decision was ultimately unanimous, but officials seem to be moving further apart. For now, they agree only that additional rate hikes are still on the table.
"Some participants stressed that it was crucial to communicate that the language in the postmeeting statement should not be interpreted as signaling either that decreases in the target range are likely this year or that further increases in the target range had been ruled out," the minutes showed.
Officials also expressed worries about the United States defaulting on its debt.
Fed economists also reaffirmed their forecast of a mild recession later in the year.
Officials voted at the May meeting to raise the central bank's benchmark lending rate by a quarter point to a range of 5-5.25%, the 10th rate hike in a row, while signaling a potential future pause in rate increases. Fed Chair Jerome Powell said in his news conference following the decision that support for the most recent rate hike was "very strong across the board," but that there was some discussion about eventually suspending rate increases.
"People did talk about pausing, but not so much at this meeting. There's a sense that we're much closer to the end of this than to the beginning," Powell said at his press conference. "If you add up all the tightening that's going on through various channels, we feel like we're getting close or maybe even there, but again that is going to be an ongoing assessment."
The debate whether the Fed should hike rates again or pause in June has intensified in recent weeks, mostly because of concerns that inflation isn't cooling fast enough.
St. Louis Fed President James Bullard, who favors an aggressive approach to combating inflation, said Monday that the Fed may have to raise rates two more times. Neel Kashkari of the Minneapolis Fed said a June pause is still on the table, but that the central bank could resume rate increases if needed.
"I think right now it's a close call, either way, versus raising another time in June or skipping. What's important to me is not signaling that we're done," Kashkari told CNBC in an interview this week.
Some Fed officials have said they are wary of other factors also weighing on the economy, such as tougher lending standards and the delayed effects of tighter monetary policy, hinting that a pause could be a more prudent option. San Francisco Fed President Mary Daly said during a conference on Monday that the Fed committee that decides interest rates should "be extremely mindful that that built up slowing is already in the chain [and] could start to show through at any point in time."
"And when you add the credit tightening that we've been seeing to that, it means that there's a lot of factors pulling back the reins on the economy and that's why we have to be so critically data dependent, because if we think it's not here yet and then we tighten too much, we can easily create an unforced error where we've over tightened," said Daly, who isn't a voting member this year.
This story is developing and will be updated.
