1. The Fed’s attitude towards inflation and interest rates

The Fed’s stance:

The Fed did emphasize the relationship between inflation and interest rates in the June FOMC minutes. According to information from multiple sources, the Fed is closely monitoring the direction of inflation while maintaining the current interest rate level (5.25%-5.50%). The minutes show that the Fed believes that there are recent signs that inflation is slowing, but the absolute level of inflation remains high. At the same time, the Fed also recognizes that the job market and broader economic growth may be cooling. Fed officials said that if inflation persists at a high level or rises further, it may be necessary to raise interest rates. However, this statement needs to be understood in conjunction with the overall message in the minutes, as the Fed also emphasized that more evidence is needed to cut interest rates, and no member currently has another rate hike as their base assumption.

The balance between interest rate cuts and rate hikes:

The Fed is indeed waiting for "more information" to gain confidence when deciding whether to cut interest rates. This includes more inflation data, job market conditions, and broader economic growth indicators. The Fed's dot plot shows that nearly 80% of members believe that there will be at least one rate cut in 2024, but there is still uncertainty about the specific timing and magnitude of the rate cut.

2. The Fed’s view on economic growth and unemployment

Cooling of economic growth:

The vast majority of Fed members believe that economic growth is gradually cooling. This view is consistent with a number of economic data, including the unexpected decline in US ADP employment data and the decline in the service industry PMI. The Fed's economic forecast table shows that the GDP growth forecast for 2024 remains at 2.1%, consistent with the previous forecast, indicating that the Fed's view on economic growth is relatively stable but has cooled.

Rising unemployment rate:

Some Fed members said that if demand weakens, the unemployment rate could rise. This echoes the Fed's expectation of cooling economic growth. The Fed's unemployment rate forecast shows that the unemployment rate is expected to remain at 4.0% this year, but the unemployment rate forecasts for 2025 and 2026 and the long-term unemployment rate are slightly raised to 4.2% and 4.1%. This shows that the Fed believes that the unemployment rate may rise slightly in the future.

Summarize

The Fed continued to maintain the current interest rate level in the June FOMC meeting minutes and emphasized the complex relationship between inflation, economic growth and unemployment. The Fed is waiting for more information to decide on the future direction of monetary policy, including whether to cut interest rates and the specific timing and magnitude of the cut. At the same time, the Fed also recognizes that economic growth is gradually cooling down and remains vigilant to the rise in unemployment.

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