In their last meeting, Federal Reserve officials expressed optimism about inflation but were cautious about raising interest rates, as indicated by minutes released on Wednesday. They decided to keep the key borrowing rate unchanged and altered the post-meeting statement to signal no cuts until they have greater confidence in inflation's decline. The officials acknowledged that the policy moves appear to be lowering inflation, which hit a 40-year high in mid-2022, but they want to see more evidence before easing policy.
The minutes showed that officials believe the current rate is likely at its peak for this tightening cycle and are cautious about reducing rates until they have confidence that inflation is moving towards their 2% target sustainably. They noted the uncertainty surrounding the length of time a restrictive monetary policy stance will need to be maintained, and some participants suggested slowing the pace of balance sheet runoff to help smooth the transition or allow it to continue for longer.
Fed officials consider current policy to be restrictive. While the economy has grown at a 2.5% annualized pace in 2023, they are concerned about elevated inflation continuing to harm households and have expressed a patient approach toward loosening monetary policy. The Fed allowed more than $1.3 trillion in Treasurys and mortgage-backed securities on its balance sheet to roll off since June 2022 and plans for a go-slow approach to quantitative tightening. However, the inflation data has been running hotter than expected, and multiple officials have indicated a cautious stance toward easing monetary policy.
The minutes showed that officials believe the current rate is likely at its peak for this tightening cycle and are cautious about reducing rates until they have confidence that inflation is moving towards their 2% target sustainably. They noted the uncertainty surrounding the length of time a restrictive monetary policy stance will need to be maintained, and some participants suggested slowing the pace of balance sheet runoff to help smooth the transition or allow it to continue for longer.
Fed officials consider current policy to be restrictive. While the economy has grown at a 2.5% annualized pace in 2023, they are concerned about elevated inflation continuing to harm households and have expressed a patient approach toward loosening monetary policy. The Fed allowed more than $1.3 trillion in Treasurys and mortgage-backed securities on its balance sheet to roll off since June 2022 and plans for a go-slow approach to quantitative tightening. However, the inflation data has been running hotter than expected, and multiple officials have indicated a cautious stance toward easing monetary policy.
