Federal Reserve officials expressed heightened concerns about inflation at their most recent meeting, showing reluctance to proceed with interest rate cuts, according to the Minutes from the April 30-May 1 policy meeting of the Federal Open Market Committee (FOMC).
By The Numbers: Inflation has eased over the past year but has stalled in recent months, with no significant progress towards the Fed’s 2% target.
The Result: “Participants observed that while inflation had eased over the past year, in recent months there had been a lack of further progress toward the Committee’s 2 percent objective,” the summary said.
- Despite this, officials expect inflation to eventually return to the 2% target, though they remain uncertain about the timeline.
Tightening? The minutes also highlighted a readiness among some members to tighten policy further if inflation risks escalate: “Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.”
- However, Fed Chair Jerome Powell commented, just like last week, at a conference, “I don’t think that it’s likely, based on the data that we have, that the next move that we make would be a rate hike.”
The Big Picture: The FOMC voted unanimously to maintain its benchmark short-term borrowing rate for the sixth consecutive meeting.
- “Participants assessed that maintaining the current target range for the federal funds rate at this meeting was supported by intermeeting data indicating continued solid economic growth,” the minutes noted.
Households Feeling The Pain: The committee expressed concerns about the financial strain on lower-income households. “Many participants noted signs that the finances of low- and moderate-income households were increasingly coming under pressure, which these participants saw as a downside risk to the outlook for consumption,” the minutes said.
- Indicators of this strain include increased use of credit cards and buy-now-pay-later services, along with rising delinquency rates for some consumer loans.
What’s It All Mean: While a possible rate hike seems unlikely, what does seem likely is rates are going to stay higher for longer.
What to watch: Upcoming inflation data and further Fed communications will be closely monitored for indications of potential shifts in policy direction, particularly regarding future rate hikes or cuts.