Inflation Fears Drove Larger Fed Rate Increase in June

Federal Reserve officials agreed at their meeting last month they would have to raise interest rates faster and to levels high enough to slow economic growth because of the worsening inflation picture.

Officials voted to raise their benchmark rate by 0.75 percentage point in June, the largest increase since 1994, and several officials have indicated since then that they are prepared to support another such increase at their meeting later this month.

The Federal Reserve's main tool for managing the economy is to change the federal funds rate, which can affect not only borrowing costs for consumers but also shape broader decisions by companies like how many people to hire. WSJ explains how the Fed manipulates this one rate to guide the entire economy. Illustration: Jacob Reynolds

Officials last month agreed they needed to raise rates to a so-called restrictive stance, high enough to slow growth, and that this would position them to lift rates to still-higher levels if inflation didn’t abate, according to minutes from the Fed’s June 14-15 meeting, released Wednesday.

“Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist,” the minutes said.