A “substantial majority” of Fed officials believe it will soon be time to slow down the central bank's current pace of rate hikes.
Minutes from the Federal Reserve's policy meeting earlier this month released Wednesday showed signs the central bank is set to shift away from its campaign of raising interest rates by 0.75% at its policy meeting next month.
"A number of participants observed that, as monetary policy approached a stance that was sufficiently restrictive to achieve the Committee's goals, it would become appropriate to slow the pace of increase in the target range for the federal funds rate," the minutes showed.
"In addition, a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate."
The minutes showed that while the pace of rate hikes might slow, how high the Fed ultimately raises interest rates during its current cycle has likely increased in recent months.
Officials noted that persistent inflation suggests rates will likely settle at levels "somewhat higher than they had previously expected."
Following the release of these minutes, stocks pushed higher on Wednesday afternoon.
In the minutes, officials noted that with the policy rate approaching a “sufficiently restrictive” stance, the level the Fed ultimately raises interest rates to has become more important than the pace of rate hikes.
“Participants agreed that communicating this distinction to the public was important in order to reinforce the Committee’s strong commitment to returning inflation to the 2 percent objective,” according to the minutes.
Several participants also felt that continued rapid policy tightening increased the risk of instability or dislocations in the financial system.
While the new focus has become how high the Fed will raise rates, many participants felt that there was significant uncertainty about the ultimate level of the federal funds rate needed to bring inflation back down to 2%.
Officials felt that purposefully moving to a more restrictive policy stance was prudent risk management given high inflation and upside risk to inflation. Members commented that recent data on inflation provided very few signs that inflation pressures were abating.
The minutes echoed Fed Chair Powell’s comments in the post-meeting press conference at the beginning of the month. Fed Chair Powell laid the groundwork to begin slowing down the pace of rate hikes at the central bank’s last policy meeting, but said the question of when to moderate the size of increases is less important than how high the central bank will ultimately raise rates to tame inflation.