Federal Reserve Meeting Minutes: Inflation Is Decreasing Gradually But Not Fast Enough For Rate Cuts

Federal Reserve Meeting Minutes: Inflation Is Decreasing Gradually But Not Fast Enough For Rate Cuts

The minutes of the Federal Reserve's June meeting were released to the public on Wednesday. They revealed that while inflation is decreasing gradually, it is not doing so quickly enough for the Fed to consider lowering interest rates.

Vikrant DUpdated: Thursday, July 04, 2024, 10:12 AM IST
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US Federal Reserve chief Jerome Powell |

The minutes of the Federal Reserve's June meeting were released to the public on Wednesday. They revealed that while inflation is decreasing gradually, it is not doing so quickly enough for the Fed to consider lowering interest rates.

In order to give them more confidence that inflation was moving sustainably toward 2 percent, participants confirmed that more positive data was needed, according to the meeting summary.

Preference for raising rate

Despite divergent opinions among the 19 central bankers present at the meeting, Some even expressed a preference for raising rates when required The minutes of the Federal Open Market Committee meeting showed that rates remained unchanged at the end of the meeting.

Since the beginning of 2021, the Federal Reserve has exceeded its target of 2 per cent annual inflation. Participants in the meeting reported that while data has improved recently, they still want additional proof that this trend will continue. The minutes revealed some disagreements in their discussions about how they would address monetary policy. While some members emphasized the need to tighten controls should inflation continue, others argued that they should be prepared to act should the labor market weaken or the economy falter.

According to the minutes, a number of participants expressed concern that the federal funds rate target range might need to be increased if inflation were to continue rising or to continue at a high level. Several attendees mentioned that monetary policy ought to be prepared to address unforeseen economic weakness.

Officials have mostly conformed to a cautious approach since the meeting, emphasizing data dependency over forecasts. Nonetheless, a number of officials, including Chair Jerome Powell, have expressed the belief that confidence in the ability to lower rates would come from sustained positive inflation readings.

Powell in Portugal

Powell stated during a speech in Portugal on Tuesday that there is now a greater balance between the risks of cutting too soon and causing inflation to spike again and cutting too late and jeopardizing economic growth. Officials had previously emphasized how critical it was to continue fighting inflation without giving up too quickly.

Market Reactions

On Wednesday, July 3, the S&P 500 and Nasdaq closed at all-time highs, maintaining their upward trend in spite of conflicting economic indicators. Prior to the Fourth of July holiday, trading volumes were noticeably low.

The tech-heavy Nasdaq Composite Index jumped 0.9 per cent to 18,188.30, while the broad-based S&P 500 gained 0.5 per cent to close at 5,537.02 and The Dow Jones Industrial Average, on the other hand, decreased by 0.1 per cent to 39,308.

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