maintained its key overnight interest rate at the 23-year high mark since July 2023 and has now indicated holding rates high until inflation cools and moves consistently to the target range. The FOMC minutes showed that most members remained concerned about the lack of progress on inflation. The FOMC minutes showed that the bar for easing remains fairly high as the need to maintain a restrictive regime was emphasized.
The emphasis was on ensuring that policy remained as restrictive as possible to facilitate the disinflation process. Contrary to the FOMC chair Jerome Powell's post-policy press conference comments, the minutes showed that ‘various members’ considered the possibility of having to raise rates if progress remained slow.The FOMC members believed that labour market re-balancing was churning slowly. While economic growth remains strong, the economy was expected to slow, led by household consumption moderating gradually.
Overall, the minutes showed that future actions would remain data-dependent with a bias towards keeping policy restrictive for as long as required. ICICI Bank, in its recent research report, said that it retains its view of a possible rate cut commencing from September onwards, with a cumulative 25 bps-50 bps expected over 2024. The bank is biased to delay easing if inflation does not meet expectations.
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