Inflation Fears Raised at June Fed Meeting

Federal Reserve policymakers decided to lower the overnight bank lending rate by just a quarter percentage point to 3.75% on June 27 because they were afraid inflation might accelerate in the longer term after five half-percentage-point cuts earlier in the year, minutes of the meeting showed.

Although members of the policymaking Open Market Committee said they probably would reduce rates again--and the committee cut the benchmark overnight rate another quarter point Tuesday to 3.5%--central bankers voted 9 to 1 to scale back the size of the June 27 move.

St. Louis Fed Bank President William Poole was the lone no vote, his first dissent in three years. Poole argued that a rapid rise in the money supply suggested the fed funds rate was already too low.

There was little debate about the need for some rate cut, given that economic statistics for May “suggested a somewhat weaker economic performance than most had anticipated,” the minutes said. “In the view of a number of members, the committee might well be near the end of its easing cycle.”