Fed officials said at their June meeting that inflation was moving in the right direction but not fast enough for them to lower interest rates. Minutes of meeting released on Wednesday show.
Minutes of the meeting: “Participants confirmed that more favorable data is needed to give them greater confidence that inflation is continuing to move towards 2%.”
Although the minutes reflected the differing opinions of the 19 central bankers who participated in the discussion, some of whom even expressed a preference for raising interest rates if necessary, the meeting ended with FOMC voters keeping interest rates unchanged.
The Fed’s annual inflation target is 2%, which has been above that level since early 2021.
Meeting participants “stressed that they did not believe it would be appropriate to lower the target range for the federal funds rate until additional information becomes available that gives them greater confidence that inflation is moving sustainably toward the Committee’s 2 percent goal.”
At the meeting, policymakers also provided updates on economic forecasts and monetary policy for the coming years.
The FOMC “dot plot” shows interest rates will fall by a quarter of a percentage point by the end of 2024, down from the three percentage points shown after the last update in March. Although the dot plot shows one downward move this year, the futures market continues to price in two moves starting in September.
Additionally, while the committee lowered its inflation forecast for this year, its economic forecasts remained largely unchanged.
The minutes reflected some disagreements as they discussed how they would conduct monetary policy. Some members noted the need for tighter controls if inflation persists, while others argued they should be prepared to deal with a recession or labor market weakness.
Minutes of the meeting: “Some participants noted that if inflation persists at elevated levels or rises further, the target range for the federal funds rate may need to be adjusted upward.” “Some participants stated that monetary policy should be prepared to respond to unexpected economic weakness. “
The minutes did not identify individual members or provide an exact number of officials who expressed particular views. However, in Fed parlance, “a number” is considered more than just “several.”
The summary also noted that an “overwhelming majority” believes economic growth is “tempering” and that current policies are “restrictive,” a key term as officials consider ways to lower inflation without causing undue economic harm. At the same time, how restrictive the policy needs to be.
Since the meeting, officials have largely stuck to cautious rhetoric, emphasizing reliance on data rather than forecasts. However, several officials, including Chairman Jerome Powell, said continued encouraging inflation data would provide confidence to lower interest rates.
In an appearance in Portugal on Tuesday, Powell said the risks of cutting rates too early and picking up inflation have become more balanced against the risks of cutting rates too late and jeopardizing economic growth. Officials have previously stressed the importance of not giving up on fighting inflation too early.
About The Author
