Minutes from the Federal Reserve's January meeting showed most policymakers expressed concern about the risks of cutting interest rates too early, given the Fed's uncertainty about how long borrowing costs should remain at their current level.
The minutes of the meeting, which was held on January 30 and 31, said that participants highlighted the uncertainty related to how long the tightening stance of monetary policy would be required to return inflation to the US central bank's target of 2 percent.
While most participants pointed to the risks of moving too quickly to ease policy... only a few pointed to the downside risks to the economy associated with maintaining excessive tightening for too long.
Policymakers generally agreed that they needed greater confidence in falling inflation before considering cutting interest rates, suggesting a cautious and perhaps slower approach to rate cuts that market participants now expect to begin in June.
The minutes said some participants pointed to a possible risk that progress on inflation could stall completely if the economy continued to perform as strongly as it has now.
The Fed kept its benchmark overnight interest rate steady in the 5.25 percent to 5.50 percent range set in July at its January meeting, opening the door to further rate cuts once policymakers gain greater confidence that inflation is moving sustainably toward the central bank's 2 percent target.
Fed Chairman Jerome Powell essentially ruled out a rate cut at the meeting scheduled for March 19-20 at a news conference on Jan. 31.
Data released after the Fed's latest meeting showed stronger-than-expected job growth and inflation in January.
While these reports have not changed the general view among policymakers that inflation will continue to decline this year, they have done little to bolster the confidence policymakers need before easing monetary policy. The current tightening is aimed at combating the worst inflation outbreak since the 1980s.
At the same time, Fed officials have pointed to a variety of risks, from perceived weaknesses in the U.S. financial system, such as falling commercial real estate prices, to the possibility that lowering inflation could take longer than expected. That in turn could slow real activity more than expected.
