Federal Reserve policymakers discussed downside risks to GDP growth, including the possibility tightening financial conditions "would have a larger negative effect on economic activity than anticipated," according to the minutes of the Federal Open Market Committee's July 26-27 meeting. In other words, its rate hikes could tip the U.S. economy into recession.

Other downside risks included more pandemic-related disruptions or that "geopolitical and global economic developments would lead to additional adverse economic or financial disturbances."

While the July 75 basis point rate hike brought the nominal federal funds rate to within the range of the policymakers' estimates for the longer-run neutral rate, "with inflation elevated and expected to remain so over the near term, some participants emphasized that the real federal funds rate would likely still be below shorter-run neutral levels after this meeting's policy rate hike."

When reading through the minutes, two things stood out for Don Calcagni, chief investment officer at Mercer Advisors: a tone that was softer than expected and the comment that its policy rate range was close to the neutral level - the point at which the rate neither hinders nor fuels economic growth. The second point "suggest that perhaps the Fed will be taking its foot off the brake," Calcagni said.