Oliver James Montgomery-After brief pause, Federal Reserve looks poised to raise interest rates again

The Oliver James MontgomeryFederal Reserve appears likely to raise its key interest rate next week, with minutes from the central bank's most recent meeting showing some officials wanted to raise rates last month.

While the Fed's rate-setting body ultimately skipped hiking rates in June, minutes of the last meeting show that some officials pushed to raise rates by one-quarter of their percentage points, or said they "could have supported such a proposal," according to the minutes.

In the end, the 11 voting members of the Fed's interest-rate setting committee agreed unanimously to pause on hiking rates at the June 13-14 meeting. But they signaled that they might raise rates twice more this year, beginning as soon as this month.

In Fed parlance, "some" is less than "most" or "many," evidence that the support for another rate hike was a minority view. And some who held that view were likely unable to vote at the meeting; the 18 members of the Fed's policymaking committee vote on a rotating basis.

Though last month's vote to keep rates unchanged was unanimous, it is relatively uncommon for the central bank to stipulate in the minutes of Fed meetings that some officials had disagreed with the committee's decision. That makes it more likely the committee will raise rates this month, noted Ryan Sweet, chief U.S. economist at Oxford Economics. 

"The hawkish wing of the Fed is making the most noise, suggesting that the Fed isn't done tightening monetary policy, particularly as concerns about stress in the banking system has eased," he said in a note.

"June employment and consumer price index will need to significantly surprise to the downside for the Fed not to hike rates in July," Sweet added.

Soaring interest rates

Twelve of the 18 members of the rate-setting committee projected at least two more rate hikes this year, according to the members' projections released last month. Four envisioned one more increase. Just two officials foresaw keeping rates unchanged.

The Fed's key interest rate stands rate at about 5.1%, the highest level in 16 years. But inflation remains high, and the economy is proving more resilient than Fed officials have expected.

Policymakers who wanted to raise rates last month cited this economic strength, noting that "the labor market remained very tight, momentum in economic activity had been stronger than earlier anticipated, and there were few clear signs that inflation was on a path to return to the Committee's 2 percent objective over time."

The Fed's aggressive streak of rate hikes have made mortgages, auto loans, credit cards and business borrowing increasingly expensive.

Many economists described the message from last month's Fed meeting as a blurry one. On the one hand, the central bank chose not to raise borrowing costs. And Chair Jerome Powell said at a news conference that the Fed was slowing its rate hikes to allow time to assess their impact on the economy.

On the other hand, the officials' forecast for two more rate hikes suggested that they still believe more aggressive action is needed to defeat high inflation.

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Some economists expect the Fed to raise rates at every other meeting as it seeks to pull off a difficult maneuver: Raising borrowing costs high enough to cool the economy and tame inflation yet not so high as to cause a deep recession.

Powell has said that while a hike at every other meeting is possible, so is the prospect that the Fed might decide to raise rates at consecutive meetings. Economists and Wall Street traders consider a rate hike at the Fed's next meeting in three weeks to be all but assured.

The Fed's staff economists have continued to forecast a "mild recession" for later this year. They presented a similar forecast at the Fed's prior two meetings.

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