Following the June FOMC meeting, several policymakers shared their views on Fed policy. Dudley justified the June rate hike as appropriate to avoid a scenario in which the FOMC waited too long to tighten and would then have to “slam on the brakes.” He thought that tightening should be performed “very judiciously” to “sustain” the expansion. Overall, he said that “So far I think we’ve gotten the balance roughly right.” He had faith that the expansion would continue, citing high confidence levels, “I’m actually very confident that even though the expansion is relatively long in the tooth, we still have quite a long way to go.” He also predicted higher wage growth with the labor market continuing to tighten: “Inflation is a little bit lower than what we would like, but we think if the labor market continues to tighten, wages will gradually pick up, and with that, we’ll see inflation get back to 2 percent.” He downplayed weak productivity growth as a “fly in the ointment.”
Other policymakers were a bit less optimistic than Dudley was. Kaplan reportedly said he wanted to see more progress on inflation heading to the two percent objective before he would be comfortable with another tightening step, although his remarks implied that he found the June rate hike acceptable and that he was not yet dismissing the narrative that recently-weak inflation is the consequence of transitory factors. He noted that the FOMC should tighten patiently and cautiously. Kashkari was even more pessimistic. He defended his decision to dissent at the June meeting, arguing that he was not yet convinced that inflation was weak only in a transitory sense and that “the risk of not moving soon enough generally doesn’t appear to be large.”