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The Federal Reserve intends to keep increasing interest rates in the coming months, but the details are uncertain, according to The Wall Street Journal (subscription).

The background: The Federal Reserve has raised interest rates this year at a pace that hasn’t been seen in four decades, putting the central bank in somewhat uncharted territory and fueling concerns about next steps.

• Minutes from the Federal Reserve’s most recent policy meeting, released this week, suggest that officials are concerned about a variety of risks and challenges as they consider how and when to reduce rate increases.

Higher rates, higher costs: “The first concern, which the minutes described as significant, is that they might need to raise rates more than currently anticipated if price pressures have spread more broadly through the economy.”

• “But officials, for the first time, acknowledged they might also raise borrowing costs more than needed—causing unwarranted economic weakness, because of the delay between when borrowing costs go up and when that is reflected in economic activity.”

Our take: NAM Chief Economist Chad Moutray noted that pricing pressures are expected to moderate over the coming months. The current forecast is for year-over-year growth in the CPI to be 6.5% at year’s end, with core inflation at 5.0%.

• At its Sept. 20–21 meeting, the Federal Open Market Committee is likely to increase the federal funds rate by 50 basis points instead of the 75-basis-point hike some were calling for in the late summer, Moutray said.
• Incoming data will influence the size of the rate hike not only in September, but also for the Nov. 1–2 and Dec. 13–14 meetings. Moutray’s current view is that there will be 25 basis-point federal funds rate hikes at each of the final two FOMC meetings this year.
• These increases would bring the federal funds range to 3.25% to 3.50% by year’s end.