Federal Reserve officials worry that letting the U.S. economy run too strong could cause major problems down the road if left unchecked, according to minutes from the most recent central bank meeting.
Some members expressed “concern that a prolonged period in which the economy operated beyond potential could give rise to heightened inflationary pressures or to financial imbalances that could lead eventually to a significant economic downturn,” the meeting summary released Thursday stated.
As a result, almost all officials at the central bank believe they should continue to raise interest rates on a regular basis. That comes even amid substantial worry that current tensions between the U.S. and its trading partners could stall the growth the economy has seen this year.
Fed business contacts “expressed concern about the possible adverse effects of tariffs and other proposed trade restrictions, both domestically and abroad, on future investment activity.” Moreover, they indicated “capital spending had been scaled back or postponed as a result of uncertainty over trade policy.”
Those concerns, however, did not stop the policymaking Federal Open Market Committee from approving another quarter-point hike to the benchmark overnight borrowing rate. The funds rate moved to a range of 1.75 percent to 2 percent, the seventh such increase since December 2015.