Federal Reserve officials suggested at their June meeting that inflation was moving in the right direction, but not fast enough to lower interest rates, according to minutes released Wednesday.
“Participants reiterated that additional favorable data is needed to give them greater confidence that inflation is moving sustainably toward 2 percent,” the meeting summary said.
Although the minutes reflected the disagreement of the 19 central bankers involved in the discussion, with some even expressing a preference for raising interest rates if necessary, the meeting ended with Federal Open Market Committee voters keeping rates on hold.
The Fed is targeting an annual inflation rate of 2%, a level it has remained above since the start of 2021. Officials at the meeting said the data has been improving recently, but they want more evidence that this will continue.
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 is available that would give them greater confidence that inflation will move sustainably toward the 2- “The committee’s percentage target has moved.”
At the meeting, policymakers also provided information about the current status of economic forecasts and monetary policy over the next few years.
The FOMC’s “dot plot” showed a decline of a quarter of a percentage point by the end of 2024, compared to the three percentage points reported after the last update in March. Although the dot chart showed one decline this year, futures markets continue to price in two declines starting in September.
The committee also left its economic forecasts largely unchanged but cut its inflation expectations for this year.
In discussions about how they would approach monetary policy, the minutes reflected some disagreements. Some members noted the need to tighten the reins if inflation persists, while others argued they should be ready to respond if the economy falters or the labor market weakens.
“Several participants noted that the target range for the federal funds rate may need to be increased if inflation remains at elevated levels or continues to rise,” the minutes said. “A number of participants noted that monetary policy should be ready to respond to unexpected economic weaknesses.”
The minutes do not name individual members, nor do they give precise figures for the number of officials representing particular positions. However, in Fed parlance, “one number” is considered more than “multiple.”
The summary also noted that an “overwhelming majority” saw a “gradual slowdown” in economic growth and that current policies were “restrictive,” a key term as officials consider how restrictive policies need to be at the same time inflation is reduced and no excessive economic damage is caused.
Since the meeting, officials have largely stuck to a cautious playbook that emphasizes reliance on data rather than forecasts. However, there were indications from several officials, including Chairman Jerome Powell, that continued encouraging numbers on inflation would boost confidence that interest rates can be cut.
Appearing in Portugal on Tuesday, Powell said the risks of cutting too soon and risking a rebound in inflation had become more balanced against cutting too late and endangering economic growth. Officials had previously stressed the importance of not giving up the fight against inflation too soon.
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2024-07-03 18:31:09
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