Fed feels rates may need to keep rising for longer

Policy makers backed raising rates at their next meeting in July by either 50 or 75 basis points, according to minutes of the Federal Open Market Committee’s June 14-15 policy meeting released Wednesday in Washington. They viewed maintaining the central bank’s credibility to control inflation as crucial. Two-year Treasury yields, which are sensitive to Fed policy, remained higher after release of the minutes.

“Many participants judged that a significant risk now facing the committee was that elevated inflation could become entrenched if the public began to question the resolve of the committee to adjust the stance of policy as warranted,” the minutes showed.

Officials also “recognized that policy firming could slow the pace of economic growth for a time, but they saw the return of inflation to 2% as critical to achieving maximum employment on a sustained basis.”

The S&P 500 swung between modest gains and losses. The tech-heavy Nasdaq 100 pushed higher after oscillating earlier in the session. Treasury yields climbed after whipsawing earlier on Wednesday, with the 10-year yield around 2.90%. The dollar rose. Oil extended its drop below $100 a barrel even after Goldman Sachs Group Inc. argued that losses driven by recession fears were overdone.

Swaps traders held mostly steady at about 69 basis points the amount of Fed rate increases they foresee at their July meeting, meaning a half-point increase is seen a sure thing while a 75 basis-point move is almost certain. The dollar index pared its gains slightly and the S&P 500 index was little changed.

The Fed’s aggressive push to curb the hottest inflation in 40 years has convulsed financial markets as investors fret that tighter monetary policy will tip the US economy into recession.