Federal Reserve officials noted a slowdown in the US economy and diminishing price pressures during their June 11-12 meeting, yet decided to maintain a cautious stance regarding interest rate cuts, as revealed in the meeting minutes released Wednesday.
The minutes highlighted several factors, including a weak May CPI reading, which suggested that inflation was easing. However, officials emphasized the need for additional data before making decisions on lowering the federal funds rate.
“They did not expect that it would be appropriate to lower the target range for the federal funds rate until additional information had emerged to give them greater confidence that inflation was moving sustainably toward” the 2 percent target, the minutes stated.
Despite observing signs of slower economic growth and reduced price pressures, Fed officials deemed that a rate cut was not yet justified. “The vast majority of participants assessed that growth in economic activity appeared to be gradually cooling, and most participants remarked that they viewed the current policy stance as restrictive,” which is likely to further reduce economic activity and inflation, the minutes indicated.
In their decision to keep the policy rate within the 5.25 percent to 5.50 percent range, officials noted the slower-than-expected progress in reducing inflation this year compared to their December projections. While some participants emphasized patience before cutting rates, “several” others pointed to the potential need for further rate increases if inflation spikes again.
The minutes also noted that the CPI data released on June 12 showed no increase on a month-to-month basis in May, a positive sign that emerged late in the Fed’s policy discussions.
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