According to Blockworks, the Federal Open Market Committee (FOMC) meeting minutes from June have provided some interesting insights into the committee's decision-making process. The minutes were released on a day when the latest Consumer Price Index (CPI) readings were also announced, leading to speculation about how much the inflation data influenced the committee's decisions.
The minutes revealed that despite a significant decline in inflation during the second half of 2023, there had been less progress than in early 2024. The May CPI reading showed some evidence of further progress, with monthly changes indicating improvement across various price categories, including market-based services.
For the first time, the FOMC acknowledged the potential for artificial intelligence (AI) to boost productivity and act as a deflationary force. The committee members highlighted a variety of factors that were likely to contribute to continued disinflation in the period ahead, including the possibility of a boost to productivity associated with businesses' deployment of AI-related technology.
The minutes also revealed a growing concern about the accuracy of labor surveys. There has been much discussion about how the establishment survey may have been overstating job gains compared to the household survey. Some FOMC members suggested that the establishment survey may have overstated actual job gains, a rare admission that they may have been looking at inaccurate data. This could mean that they have been more hawkish on the labor market than they should have been.
The minutes also suggested that most job gains have been within part-time jobs while the economy continues to lose full-time jobs, indicating that the labor market may be colder than previously thought. Overall, the minutes represent an outdated perspective on the economy that is no longer as relevant, especially in the current economic climate. However, the discussions were generally dovish, particularly in light of the soft economic data received since the meeting.