According to the minutes of the FOMC meeting on Wednesday, June 13-14, most of the federal policymakers present wanted to keep interest rates steady. Many people were glad they did. Unfortunately for consumers, the FOMC sees a mild recession on the horizon.
However, officials also saw a roughly 60% chance that rates would not reach their highest levels yet. The indecision is a sign that the US central bank has struggled to keep inflation at its 2% target. As expected, the Fed kept interest rates at 5% to 5.25%. The pause was the first in more than a year of consecutive rate increases. Since March 2022, when the interest rate was zero, the Fed has raised interest rates ten times in a row. matching tempo last seen in the 1980s.
Fed officials wanted time to assess the economy
The Federal Open Market Committee is a committee within the Federal Reserve Board’s bylaws. It meets every six weeks, about eight times a year, to assess the state of the economy and make decisions on monetary policy, including interest rates and other measures. The minutes of the meeting are being scrutinized for signs of the health of the US economy.
Regarding the decision to stop raising interest rates last month, the minutes of the meeting stated:
Most of these participants noted that leaving the target range unchanged at this meeting would allow them more time to assess the economy’s progress toward the committee’s goals of maximum employment and price stability.
Some officials also seemed to believe, at the time, that real GDP was growing at a moderate pace in the second quarter. Although the meeting acknowledged that consumer prices were continuing to rise, if at a slower rate than last year.
According to the minutes, when energy prices and most food prices are excluded, core price inflation remained relatively flat.
The Fed expects a moderate recession
Officials’ economic forecasts for the June FOMC meeting predicted a mild recession later this year. Although, as indicated on the record, not the worst possible prospect. It will be followed by a gradual recovery, which will be neither “deep nor long”.
Forecasts predicted a slowdown in real GDP growth for the current quarter and the third quarter. With a modest decrease expected in the fourth quarter of this year and the first quarter of next year.
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