Source: AFP
Federal Reserve officials expect interest rates will need to remain high “for some time” to tackle persistent inflation, according to minutes of the latest rate decision released on Wednesday.
The Fed announced last month that it would keep interest rates at a 22-year high and made up to three rate cuts in 2024, sending US stock markets to new records.
Since then, Fed officials have sought to temper strong market expectations that cuts were imminent, stressing that inflation remains stuck above the central bank’s long-term target of 2 percent.
In December, the Fed’s rate-setting committee “confirmed that it would be appropriate for policy to remain accommodative for some time until inflation moves clearly downward” toward the target, according to meeting minutes released on Wednesday.
The document did not delve into the details of a discussion that Fed Chairman Jerome Powell mentioned at last month’s press conference about when it would be appropriate to start cutting interest rates.
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From its peak in 2022, the Fed’s favored inflation measure has fallen sharply, reaching an annual rate of 2.6% in November.
So-called core inflation, which strips out volatile food and energy prices, also fell last month to an annual rate of 3.2 percent.
At the same time, economic growth has shown signs of moderating, the labor market appears to be softening, and the unemployment rate has remained near historic lows.
Those events have fueled hopes that the Fed is on track to reduce inflation while avoiding a damaging recession, a rare feat known as a “soft landing.”
Speaking at a conference in Raleigh, North Carolina on Wednesday, Richmond Fed President Tom Barkin said a soft landing “is increasingly likely but by no means inevitable.”
But Barkin, who is a voting member of the Fed’s rate-setting committee this year, added that there was “no autopilot” and that policymakers will continue to be guided by incoming data.
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Futures traders have assigned a greater than 90 percent chance that policymakers will vote to keep the Fed’s key lending rate steady when they meet later this month, according to CME Group data.
Source: AFP