The Federal Reserve has released the minutes from its June Federal Open Market Committee (FOMC) meeting, held on June 11-12, where it opted to maintain the current interest rates.
Key points from the meeting minutes include:
– The FED is seeking ‘additional information’ to build confidence for any potential interest rate reductions.
– Many workers are concerned that unemployment may rise if demand decreases.
– The majority of participants observed that economic growth in the USA is gradually slowing.
– Most participants consider the current policy stance to be restrictive.
– If inflation remains high or increases further, some participants believe interest rates may need to be raised.
– Some participants emphasized that a further decrease in demand could lead to higher unemployment than recently observed.
– There was a consensus that the policy should be prepared to respond to unexpected economic weaknesses.
– The May Consumer Price Index (CPI) data was seen as evidence of progress toward the inflation target.
– Participants noted modest progress toward the Committee’s 2% inflation target in recent months.
– The potential for increased unemployment if demand weakens was a recurring concern.
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FED Chairman Powell reiterated the need for more data before easing monetary policy. Powell’s remarks followed the release of the personal consumption expenditures index data, which showed a drop in inflation from 2.8% in April to 2.6% in May, the lowest in over three years. This slowdown in inflation led FED officials to consider maintaining high interest rates for a longer period. Powell emphasized the need to understand if the current inflation levels reflect true underlying inflation and mentioned that the strong but gradually cooling job market allows the FED to be patient.
These comments were welcomed by investors, who now expect a rate cut later this year, with the probability of the first rate cut in September estimated at around 60%.
*This is not investment advice.
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