The minutes also conveyed optimism about the outlook for the US economy as the Fed’s influential staff economists “no longer judged that the economy would enter a mild recession toward the end of the year.”

Still, they expected economic growth over the next two years “would run below their estimate of potential output growth, leading to a small increase in the unemployment rate relative to its current level.”

Eoin Treacy's view

This long-term chart of the core services less housing index helps to highlight why the Fed is so focused on getting inflation back down to trend now rather than later. The rate bottomed near 2% in 1963 and trended higher until 1970.

The closing of the gold window in 1971 temporarily got the inflation issue under control but the demise of the Dollar was one of the primary causes of the oil embargo. Inflation came roaring back, and it was a decade before the rate dropped back below 6%.
It’s also worth considering that unemployment bottomed around 3.4% in the last 1960s and also trended higher all the way through to the early 1980s. That’s an additional reason to ensure inflation is brought back under control sooner rather than later. The Fed cannot afford to allow inflation to fester and particularly while unemployment is close to the late 1960s lows.

The clear risk is they overtighten and cause a recession where unemployment spikes. The big question at that point is whether they have been chastened enough by the return of inflation to limit support for asset prices and subsequently to withdraw support as soon as stability is regained. That’s the only way they can ensure inflationary pressures are kept under control.
In the near-term that suggests bonds yields have further to go on the upside. I remain of the view the most likely scenario is a deflationary shock in response to tightening.