FOMC ‘majority’ emphasized upside risks to inflation outlooks, minutes show

Minutes from the last Federal Reserve meeting read, “With regard to the outlook for inflation, participants generally expected that, given appropriate monetary policy, inflation would be somewhat elevated in the near term and would gradually return to 2 percent thereafter. Some participants noted that business contacts had indicated that they would raise prices over time because of higher input costs stemming from tariff increases. Uncertainty remained about the inflation effects of this year’s increase in tariffs, though most participants expected these effects to be realized by the end of next year. Some participants remarked that the labor market was not expected to be a source of inflationary pressure. A couple of participants expected that the reduction in net migration would be associated with lower demand and lower inflation, and a couple of participants observed that continued productivity gains would likely reduce inflation pressures. Participants noted that longer-term inflation expectations continued to be well anchored and that it was important they remain so to help return inflation to 2 percent. Various participants stressed the central role of monetary policy in ensuring that longer-term inflation expectations remained well anchored. A majority of participants emphasized upside risks to their outlooks for inflation, pointing to inflation readings moving further from 2 percent, continued uncertainty about the effects of tariffs, the possibility that elevated inflation proves to be more persistent than currently expected even after the inflation effects of this year’s tariff increases fade, or the possibility of longer-term inflation expectations moving up after a long period of elevated inflation readings. Some participants remarked that they perceived less upside risk to their outlooks for inflation than earlier in the year.”