Federal Reserve officials continued to anticipate further increases in borrowing costs would be necessary to bring inflation down to their 2% target when they met earlier this month, though almost all supported a step down in the pace of hikes.

“Participants observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2%, which was likely to take some time,” according to the minutes of the Jan. 31-Feb. 1 gathering released in Washington on Wednesday.

The minutes also said “almost all” officials agreed it was appropriate to raise interest rates by 0.25 percentage points at the meeting, while “a few” favored or could have supported a bigger 0.5 percentage-point hike.

Central bankers raised interest rates by a quarter-point, moderating their action after a half-point hike in December and four consecutive jumbo-sized 0.75 percentage points increases. The move lifted the benchmark policy rate into a range of 4.5% to 4.75%. Both Chair Jerome Powell and the minutes indicated that officials are prepared to raise rates further to produce a broader slowdown in the economy that tamps down inflation.

“Participants generally noted that upside risks to the inflation outlook remained a key factor shaping the policy outlook, and that maintaining a restrictive policy stance until inflation is clearly on a path toward 2% is appropriate from a risk-management perspective,” the minutes said.

A number of officials said that an “insufficiently restrictive” policy stance could stall recent progress on moderating inflation pressures, according to the minutes.

The economy exited 2022 “with more momentum in the labor market and risks around inflation” than Fed officials likely expected, said Michael Gapen, head of economics at Bank of America Securities. “We need to see broad-based disinflation and we didn’t get that in recent data.”

Gapen’s forecast is for the Fed to continue tightening to a range of 5.25% to 5.5%, one hike above the 5.1% median officials forecast in December.

Going into the meeting, money markets forecast interest-rate cuts in the back half of 2023. They have since tempered bets on the likelihood that the Fed will reverse course and start cutting rates before the end of this year.

Following the release of the minutes, swaps traders kept steady their conviction that the Fed will keep pushing rates higher, with the market indicating that 0.25 percentage points hikes are likely at the March, May and June meetings. Investors lifted expectations for where rates will peak to about 5.36%.

In the minutes, Fed officials said that it was important “that overall financial conditions be consistent with the degree of policy restraint that the Committee is putting into place in order to bring inflation back to the 2% goal.”

Cleveland Fed President Loretta Mester said Feb. 16 that she had seen a “compelling” economic case for a half-point increase during the last meeting, a view echoed later that day by St. Louis Fed chief James Bullard. Neither official votes on policy decisions this year.