Fed officials, spooked by data, fretted in June about inflation becoming entrenched.

Federal Reserve officials made their biggest interest rate increase since 1994 at their June meeting after incoming inflation data spooked them, minutes from their last meeting showed, with policymakers expressing concern that stubbornly persistent price pressures posed a “significant risk” of becoming a more permanent feature of the economy if the central bank did not act decisively.

The Fed lifted its main policy interest rate by three-quarters of a percentage point last month as it tried to raise the cost of borrowing across the economy and slow down consumer and business demand. The move, which followed a half-point increase in May and a quarter-point increase in March, marked a meaningful escalation in the central bank’s battle against rapid inflation.

Notes from the meeting, released Wednesday, shed light on what motivated officials to make such a big move — and what it could mean going forward. Policymakers had been unsettled by a re-acceleration in the Consumer Price Index inflation measure, which climbed by 8.6 percent in the year through May. And officials feared that if they did not take sufficient action, consumers and businesses might begin to expect fast price increases to last and behave in ways that would make rapid inflation more permanent and even more difficult to quash.

Article source: https://www.nytimes.com/2022/07/06/business/fed-minutes-inflation-interest-rates.html