At the latest meeting of the U.S. Federal Reserve Board, officials expressed growing concerns about inflation, with many members hesitant to move to low interest rates.
Meeting details: the minutes of the Federal Open Market Committee (FOMC) meeting held between 4/30/04 and 5/11 revealed concerns about the #persistence of inflation. Despite some easing over the past year, recent data show that prices of goods and services have risen significantly.
Fed Target: the Fed is aiming for 2% inflation, but current indicators show that price increases are well above that level. This sustained inflation has prompted policymakers to consider further monetary tightening if necessary.
The Fed decided to keep short-term lending rates in the 5.25-5.5% range, which is a 23-year high. The decision was based on data showing continued strong economic growth.
There has been a slight improvement since then, with the Consumer Price Index for March showing annualized inflation at 3.4%, down slightly from March.
However, the consumer sentiment survey shows that concerns about inflation are on the rise.
Risks and Concerns
Fed officials cited several growing risks to inflation, including geopolitical events and their impact on low-income consumers. Some attributed the rise in inflation earlier in the year to seasonal factors, while others cautioned against discounting these large-scale changes.
Concerns were also raised about consumers' increased use of credit cards and riskier financing methods such as buy now, pay after service.
Despite #optimism about the prospects for economic growth, officials expect some slowdown this year. They believe inflation will eventually return to the 2% target, but are uncertain about the timing and impact of high interest rates.
Market Expectations
After the meeting, Fed officials maintained a cautious tone. Fed Chair Waller emphasized that "months" of positive data are needed before a rate cut can be considered.
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