“Most” Federal Reserve officials last month continued to see serious inflation risks which could require more interest-rate hikes, according to the minutes of the July policy meeting.

The big question facing Fed officials continues to be whether the level of the policy interest rate is now “sufficiently restrictive” to bring inflation down to 2% target.

The summary of their July 25-26 meeting, released Wednesday, said “most participants continue to see significant upside risks to inflation, which could require further tightening of monetary policy.”

At the same time, there was a camp that expressed concerned about the outlook for the economy.

“Some” Fed officials seemed more worried about an economic downturn even as the economy looked resilient.

In their view, “even though economic activity had been resilient and the labor market had remained strong, there continued to be downside risks to economic activity and upside risks to the unemployment rate.”

These officials were worried that the full impact of the Fed’s past rate hikes over the past 16 months would dampen growth in coming months.

A “number” of Fed officials said it was important that the Fed steer clear of “inadvertent overtightening of policy.”

Two officials from this dovish camp said they wanted the Fed to hold interest rates steady at the July meeting.

But “almost all” Fed officials disagreed. The voting members of the Fed’s interest rate committee voted unanimously in favor of a 25 basis point hike at the meeting, which brought the benchmark federal funds rate to a range of 5.25%-5.5%. This was the 11th rate hike since March 2022. Rates are now at their highest level in 22 years.

According to the minutes, Fed officials believed that the data arriving in coming months would clarify whether the “tentative signs that inflation could be abating” would turn out to be a lasting trend.

“Several” Fed officials commented that significant disinflationary pressures had yet to become apparent in the prices of core services excluding housing.”

Fed officials will meet again on Sept. 19-20. Fed Chairman Jerome Powell has said this is a “live” meeting, meaning the Fed will either hike rates again or decide to skip taking any action.

Traders in derivative markets only see about a 10% chance of a rate hike in September.

Fed officials have penciled in one more rate hike this year. There are three more interest-rate policy meetings left.