Most Federal Reserve (Fed) members have questioned whether monetary policies are restrictive enough to bring inflation down to target levels.
According to the minutes of the Federal Open Market Committee (FOMC) meeting released on the 22nd, while members believe the monetary policy is appropriate, several members mentioned their willingness to tighten it further if necessary.
The minutes highlighted members’ concerns about weak price indicators in the first quarter, noting that “Members paid attention to the disappointing price indicators in the first quarter.” They also doubted the timeline for stable inflation, stating, “It might take longer than expected to be confident that inflation is heading towards 2%.”
Furthermore, the minutes revealed some uncertainty regarding monetary policy: “Many members mentioned uncertainty about the degree of restriction.”
Moreover, members discussed maintaining a high-interest rate stance despite the absence of signals that inflation is consistently heading towards 2%.
The minutes of this FOMC meeting are relatively hawkish compared with the content of Chairman Jerome Powell’s May FOMC press conference.
Torsten Slok, Senior Economist at Apollo Global Management, pointed out, “The minutes seem somewhat inconsistent with the press conference.”
During the press conference, Powell expected that the current level of interest rates would be sufficiently restrictive to lower inflation to the target rate. He added, “I don’t see the next policy decision being a rate hike.” Thus, the May FOMC was predominantly seen as dovish.
Powell also said at a discussion hosted by the Netherlands Foreign Bank Association in Amsterdam on the 14th that inflation will move back down every month to levels more like the lower readings we had last year.
Given Powell’s and the Fed members’ differing perspectives on monetary policy, concerns about the Fed’s long-term high-interest rate stance are expected to rise.
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