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Fed officials became more cautious about the need to continue raising rates despite unanimous support for raising the benchmark interest rate last month, according to the minutes of their July meeting.

Many policymakers worry that the risk of “too tight” monetary policy and not doing enough to reduce persistently high inflation has become more balanced, or “two-sided.”

While policymakers continued to worry about the risk of rising inflation, the minutes appeared to show growing unease about the impact of Fed tightening on the economy. Last month, officials unanimously supported a 25 basis point hike.

Some participants expressed a preference for keeping rates steady, arguing that doing so “could lead to further progress on the committee’s goals while allowing time for the committee to further evaluate that progress.”

The July hike lifted the federal funds rate to a target range of 5.25-5.5%, the highest level in 22 years. It followed a brief pause in June, when officials took a more gradual approach to tightening monetary policy after their most aggressive move in decades.

Economists widely expect last month’s hike to be the last of the year, although central bank officials in June expected the benchmark rate to peak a quarter-percentage point to 5.5-5.75%.

Fed Chairman Jay Powell stressed last month that the FOMC would digest “all” of the economic data before its next meeting in September, but acknowledged that “given the progress we’ve made, we have the ability to take some steps.” “Patience” when it comes to further rate hikes.

While price pressures have eased in recent weeks and are expected to continue to recede in the coming months, inflation remains too high for the Fed’s wishes. While the labor market has cooled further, consumer spending on goods and services has remained strong even as borrowing costs are higher than they were more than a year ago when the Fed’s benchmark interest rate hovered near zero.

As a result, fears that the U.S. economy will slip into recession have receded, with Fed staff dropping calls for a modest contraction this year. They still expect “a marked slowdown in growth,” said Powell, who has long been optimistic about the prospect of a so-called soft landing.

Another pause in rate hikes in September will give the Fed more time to assess the economy’s response to previous rate hikes or whether borrowing costs need to rise further to push inflation back toward its long-term 2 percent target.

While officials are still debating whether additional action is needed, they appear more unanimous in agreeing to keep the benchmark interest rate at a level that has dampened demand for a long time. No officials have suggested the Fed will cut rates this year. Traders widely expect the central bank to delay cutting rates until 2024, according to futures markets.

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