Federal Reserve officials earlier this month coalesced around a desire to hold interest rates higher for longer and “many” questioned whether policy was restrictive enough to bring inflation down to their target.

Minutes from the two-day Federal Open Market Committee gathering ending May 1 showed that, while participants assessed that policy was “well positioned,” various officials mentioned a willingness to tighten policy further if warranted.

“Participants noted disappointing readings on inflation over the first quarter,” according to the minutes released Wednesday in Washington. The minutes showed “that it would take longer than previously anticipated for them to gain greater confidence that inflation was moving sustainably toward 2%.”

Officials also discussed holding rates steady for longer “should inflation not show signs of moving sustainably toward 2% or reducing policy restraint in the event of an unexpected weakening in labor market conditions,” the minutes said.

Following a first-quarter pickup in inflation, Fed officials have said they will hold interest rates at a 23-year high for longer than initially anticipated.

Chair Jerome Powell said at his May 1 press conference that it’s clear monetary policy is restrictive and that over time he expects the current level of rates to bring inflation down to the central bank’s 2% target. He added it was unlikely the Fed’s next move would be a hike.

“We’ll need to be patient and let restrictive policy do its work,” he reiterated at an event in Amsterdam on May 14.

The minutes offered a more nuanced picture. Though officials viewed policy as generally restrictive, policymakers pointed to the possibility of high interest rates having a smaller effect on the economy than in the past. They also said the long-run neutral rate — a level of rates that neither slows nor stimulates demand — may be higher than previously thought.

“Many participants commented on their uncertainty about the degree of restrictiveness,” the minutes said.

Atlanta Fed President Raphael Bostic said Tuesday that officials at the US central bank are holding active discussions about the neutral rate, adding “everyone is rethinking that dynamic.”

Latest Inflation Data

Since the Fed’s meeting, April consumer price data showed a modest cooling in inflation following three months of higher-than-hoped readings. While price growth remains above the Fed’s goal, the latest figures alleviated some concern that it was reaccelerating.

Governor Christopher Waller welcomed the better inflation data in comments earlier this week but said he’d like to see several more good reports before lowering rates. He further distanced the Fed from potential rate hikes, instead opening the door to lower borrowing costs at the end of this year.

The minutes do seem “somewhat inconsistent with the press conference,” said Torsten Slok, chief economist at Apollo Global Management.

The economy continues to grow at a solid pace, though recent reports on retail sales and manufacturing suggest demand is easing. The labor market remains resilient but is also showing signs of cooling. Payrolls rose at the slowest pace in six months in April.

A softer inflation report for April and somewhat slower pace of hiring in April “validates” the higher for longer message Powell talked about in the press conference, said Stephanie Roth, chief economist at Wolfe Research.

Investors are betting on one to two rate cuts this year, according to futures markets. While that view is similar to many forecasters, others expect more or less. Goldman Sachs Group Inc. Chief Executive Officer David Solomon said Wednesday that he predicts “zero” cuts in 2024.

Officials voted to slow the pace at which the central bank is shrinking its asset portfolio at their latest meeting, reducing the cap on runoff for Treasuries to as much as $25 billion from $60 billion starting in June. Investors had generally expected the cap to fall to $30 billion.

The minutes showed almost all participants expressed support for the new cap, however, a “few” officials supported continuing the current pace of runoff or a higher cap on Treasuries than was decided on.

–With assistance from Kristy Scheuble, Amara Omeokwe and Liz Capo McCormick.