Federal Reserve officials at their June meeting acknowledged that while inflation is progressing in the right direction, it is not decreasing swiftly enough to warrant a reduction in interest rates, according to minutes released on Wednesday, CNBC reported. The summary of the meeting revealed that participants stressed the need for more favorable data to gain greater confidence that inflation is moving sustainably towards the 2% target set by the Fed, CNBC noted.
During the meeting, there was notable disagreement among the 19 central bankers involved in the discussion. Some officials expressed a willingness to raise rates if necessary, yet the Federal Open Market Committee (FOMC) ultimately decided to maintain the current rates, CNBC highlighted. The Fed has aimed for a 2% annual inflation rate, a target that has been surpassed since early 2021.
Fed officials observed that recent data showed improvement but emphasized the need for additional evidence to confirm a sustainable movement towards the inflation goal. They did not anticipate lowering the target range for the federal funds rate until more substantial information emerges.
At the June meeting, policymakers updated their economic projections and monetary policy outlook for the coming years. CNBC pointed out that the FOMC’s “dot plot” indicated a single quarter percentage point cut by the end of 2024, a decrease from the three cuts projected in March. Despite this, according to CNBC, futures markets are still pricing in two cuts starting in September.
Economic projections remained largely unchanged, although the committee lowered inflation expectations for this year, CNBC noted. Discussions on monetary policy revealed some disagreements, with some members advocating for tightening should inflation persist, while others recommended readiness to respond to economic weakness or a deteriorating labor market, CNBC mentioned.
Several participants highlighted that if inflation remains elevated or rises further, it might be necessary to increase the federal funds rate target range, CNBC stated. Conversely, a number of participants suggested that monetary policy should be prepared to address unexpected economic downturns, CNBC reported.
Since the June meeting, Fed officials have maintained a cautious stance, emphasizing data dependency over forecasts. CNBC reported that Chair Jerome Powell and other officials have indicated that encouraging inflation readings could bolster confidence in lowering rates.
During an appearance in Portugal on Tuesday, Powell noted that the risks of cutting rates too soon, potentially leading to a resurgence in inflation, have become more balanced against the risks of cutting too late and hindering economic growth, CNBC highlighted.
