The Federal Reserve released the 3-week delayed minutes of the June FOMC meeting, and they showed that the committee’s combat with inflation is still set to continue in 2023, with the hope to beat it closer to the targeted 2%. Although the vote to pause the interest rate hike in June was unanimous, the minutes state that “some” committee participants favoured a 25-bps raise.
The Federal Open Market Committee members have stated that the inflation rate is still “unacceptably high” at the current levels and are mostly in agreement that more hikes are on the cards for the remainder of the year. All but 2 of the 18 members are looking towards more hikes for the rest of the year, and half of all members believe that two hikes are warranted. The decision for the pause in June was primarily to observe the effects of the rapid hike in interest rates in the fight against inflation, with some members seeing that signs may only appear later. At the time of the meeting, the United States economy remained resilient, the job market was tight, and the impact of the bank problem in March still needs to be observed if it caused any issues in credit.
The committee still state that they will be making their decisions based on data, and Federal Reserve Chairman Jerome Powell said the central bank has “a long way to go” to bring inflation back to the Fed’s 2% goal. The committee anticipates a slight recession in the second half of the year, with some members expressing concern over consumers’ tightening spending habits and the predicted slowdown in hiring. “The economy was facing headwinds from tighter credit conditions, including higher interest rates, for households and businesses, which would likely weigh on economic activity, hiring, and inflation, although the extent of these effects remained uncertain,” the minutes stated.
Sources: Yahoo Finance, CNBC, MarketWatch, Bloomberg and Federal Reserve
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