Fed will not cut rates until there is confidence in inflation reaching 2%

The Federal Reserve's June meeting minutes, released on Wednesday, revealed that officials are cautiously optimistic about progress towards their 2% inflation target but feel that more evidence is needed before considering a rate cut. The meeting summary indicated that additional favorable data is required to give policymakers greater confidence that inflation is moving sustainably towards the desired level.

While there was some disagreement among the 19 central bankers who participated in the discussion, the meeting ultimately concluded with the Federal Open Market Committee voters maintaining interest rates at their current levels. The Fed's "dot plot" projections showed a potential quarter percentage point cut by the end of 2024, down from previous projections.

The minutes also highlighted discussions around how the Fed would approach monetary policy in the face of varying economic conditions. Some members suggested tightening policy if inflation persists, while others advocated for readiness to respond to unexpected economic weakness.

Chair Jerome Powell emphasized the importance of data dependency in decision-making, noting that continued encouraging readings on inflation would provide confidence to consider lowering rates. Powell also mentioned in a recent appearance in Portugal that the risks of cutting rates too soon versus too late have come more into balance.

Overall, the Fed seems to be taking a cautious and measured approach to monetary policy, balancing the need to address inflation with avoiding potential harm to economic growth. While some officials have suggested the possibility of rate cuts in the future, the focus remains on data-driven decision-making to ensure a sustainable path towards the Fed's inflation target.


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