Fed Says Rate Cuts Too Early Due to ‘Modest Progress’ in Inflation
After rising to 3.5% in March, inflation in the US has fallen by one-tenth for two months in a row, reaching 3.3% in May.
Members of the Federal Open Market Committee (FOMC) Federal Reserve (The Fed) believes that everything is still it’s too early to cut interest ratessince the progress of inflation to 2% target still ‘modest’This is stated in the minutes of the last meeting, published this Wednesday.
“The data received indicate that continued strong growth in economic activity and a strong labor marketwhile noting modest additional progress towards achieving the 2% inflation target,” the document says.
All participants at the meeting, held on 11 and 12 June, considered that, given the current economic conditions and their implications for employment and inflation prospects, as well as the balance of risks, it would be appropriate maintain rates in the range of 5.25 to 5.5%.
“In discussing the outlook for monetary policy, they noted that progress in reducing inflation has been made this year slower than they expected in Decemberand therefore “stressed that they did not expect it would be appropriate to ‘cut rates’ until more information emerged that gave them greater confidence that inflation was steady forward movement“to 2%,” the text adds.
Participants estimate that with the easing of tensions in the labour market and the decline in inflation last year, there are risks to achieving the Employment and Inflation Committee’s goals “they have moved to a better balance”which leaves monetary policy “well placed to counter risks and uncertainty.”
However, some noted that the continued strength of the economy and other factors could lead to long-term equilibrium interest rate will be higher than previously expected, in which case “both the monetary policy stance and overall financial conditions could suffer.”
By the end of 2024, the FOMC, the body responsible for setting the course of US monetary policy, has planned four meetings: V July, September, November and DecemberIn June, he was considering a single cut by the end of the year.
After rising to 3.5% in March, inflation two months in chains one tenth, and in May it was 3.3%.