Source: AFP
Members of the Federal Reserve’s rate-setting committee said last month that the bank’s employment and inflation targets are moving into “better balance,” with some calling for “patience” on rate cuts, according to minutes of the meeting which were published on Wednesday.
The U.S. central bank has kept interest rates at a two-decade high for nearly a year as it tries to bring inflation down to its long-term goal of two percent without doing much damage to either the labor market or the broader economy.
It has reduced inflation to an annual rate below 3%, while growth has remained positive and the unemployment rate has remained near record lows.
Now, after years of focusing primarily on inflation, Fed officials have increasingly turned their attention to the labor market, which has shown some signs of weakness in recent months despite remaining strong overall.
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The bank has a dual mandate to tackle both inflation and unemployment. Fed officials said at the June 11-12 interest rate meeting that they were moving “toward a better balance” between the two, according to meeting minutes.
“Some participants emphasized the need for patience to allow the Commission’s restrictive policy to curb aggregate demand and further moderate inflationary pressures,” the Fed’s minutes show.
However, several participants also kept alive the prospect of rate hikes if inflation picked up, suggesting the US central bank is in no rush to start the process of cutting its key lending rate.
“We have made considerable progress in reducing inflation to our target, while the labor market has remained strong and growth has continued,” Fed Chairman Jerome Powell said during an event in Portugal on Tuesday.
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“We want this process to continue,” he added.
In last month’s rate decision, the Fed made just one rate cut for this year and said it did not expect inflation to reach 2% until 2026.
However, futures traders believe there is a greater than 70 percent chance the U.S. central bank will start cutting interest rates from mid-September and see it more likely that it will make a second cut by the end of the year, according to CME Group data.
Source: AFP
