At the latest Federal Reserve meeting, officials admitted the deceleration of the U.S. economy and the easing of price pressures but opted to maintain current interest rates. The minutes from the June 11-12 meeting were released on Wednesday.
The minutes highlighted the weak Consumer Price Index for May as evidence of reduced inflation. Additional indicators included slowing wage growth, price reductions at major retailers, and business reports indicating easing price pressures.
Despite these signs, the Fed is not ready to cut rates, with authorities emphasizing the need for further data confirming a steady move toward the 2% inflation target.
At the meeting, the Personal Consumption Expenditure (PCE) Price Index was at 2.7% year-over-year for April. Policymakers viewed these figures as strong, maintaining tight monetary policy even amidst a slowing economy and easing price pressures.
The index fell to 2.6% in May, indicating a slowdown in economic activity. However, with interest rates held at 5.25%-5.50%, progress in reducing inflation has been slower than anticipated.
Some officials advocated for patience before cutting rates, while others acknowledged the possibility of rate hikes if inflation rebounds. The minutes were considered dovish, focusing on factors contributing to the reduction of inflation.
Economists suggest the Fed is prepared to respond quickly to data changes. Some predict a 1.25 percentage point rate cut by year-end, as job growth slows and inflation continues to decline.
Investors anticipate a quarter-percentage point rate cut at the Fed's meetings in September and December. The minutes also revealed the risks of slower employment growth and the need to prepare the public and investors for varying economic scenarios.
Fed officials discussed alternative scenarios, stressing data-driven decision-making and evolving perspectives. While the labor market may slow faster than expected, normalization might not lead to a significant increase in unemployment.
The minutes evidence a cautious shift toward looser monetary policy. Data released on June 12 demonstrating no growth in the consumer price index for May was an encouraging sign.
The central bank’s next meeting scheduled for 30-31 is expected to leave the benchmark interest rate unchanged, with updated labor market and economic growth information available by then.
Login in Personal Account
153