Members of the Federal Open Market Committee (FOMC) agreed in their latest interest rate decision that a new hike may be appropriate if economic data received indicate “insufficient progress” in reducing inflation. The information comes from the minutes released today, regarding the last meeting of the authority held in November when the U.S. interest rate was kept unchanged.

“Participants noted that a further tightening of monetary policy would be appropriate if incoming information indicated that progress toward the inflation goal was insufficient,” the document says. On the other hand, the publication pointed out that officials agreed they could take a cautious approach to raising rates in the future.

The document also indicated that FOMC members observed a “significant” tightening of financial conditions in recent months, driven by higher yields on long-term bonds. According to participants, the increase in long-term bond yields can be attributed to a higher risk premium demanded by investors.

Furthermore, according to the group members, inflation remained “well above” the central bank’s target of 2.0%, likely requiring interest rates to remain in a “restrictive stance” for some time until inflation is on a sustainable downward trajectory.

According to the minutes, the cautious stance comes at a time of high uncertainty about the economic outlook, where Fed officials will need to see more progress on inflation before declaring the end of the monetary tightening process. Among the risks they see is the possibility that the conflict in the Gaza Strip could raise global inflation through oil prices.

On the domestic front, the minutes mention strong consumer spending, which some officials believe will continue, and the possibility that rising Treasury yields may no longer support monetary tightening, as emphasized by many officials present at the meeting. Nonetheless, the overall assessment is that the Treasury market continues to tighten financial conditions.