Fed Minutes Signal Renewed Worries About Inflation

• Several Fed participants supported a 'two-sided' approach to future interest rate decisions, reflecting the possibility of upward adjustments to interest rates.
• The primary focus of the January meeting was on inflation, with concerns that disinflation might be slower and more uneven than generally expected, and that the risk of inflation running persistently above the 2% objective was meaningful.
• Officials noted resilient consumer spending (driven by higher incomes) and robust business investment, particularly in technology, but also identified vulnerabilities in high asset valuations, historically low credit spreads, and the private credit sector.

The Fed minutes reveal renewed concerns among policymakers about persistent inflation, with several members open to further interest rate hikes if inflation doesn't decline as expected. The focus has shifted from job growth to inflation, and while the economy shows resilience, vulnerabilities in asset valuations and the private credit sector were noted.