At their June gathering, Federal officials chose to postpone raising interest rates, opting instead for a break to evaluate the repercussions of the prior 10 increases. Minutes issued on Wednesday revealed differences of opinion amongst the members, with a few stating that rates should move up since inflation stays high.
Almost all Federal Reserve officials at their June meeting expressed the opinion that further tightening of monetary policy was probable, albeit at a slower rate than what had been seen since the beginning of 2022. Ultimately, policymakers decided not to change rates due to worries related to economic expansion, although most members thought additional hikes were coming soon. The members argued that a short break would provide them with the opportunity to evaluate the consequences of the increases, which had already reached 5 percent - the highest level since the early 1980s. The committee was concerned about the effects of the tighter credit conditions, rising interest rates, and how these factors would affect economic activities, job creation, and inflation, though the full extent of the effects was uncertain. Thus, the decision to keep rates unchanged was a unanimous one as they took into account the significant cumulative tightening of monetary policy, as well as the lags in which policy affects economic activity and inflation. The markets showed no significant response as the announcement was made, with the Dow Jones Industrial Average down about 120 points near the end of trading, while Treasury yields were significantly higher.
The document showed that the members disagreed on the matter. According to the documents released after the June 13-14 session, all but two of the 18 participants thought that a hike would be appropriate this year, and 12 believing that two or more would be necessary. The minutes stated that those favoring the 25 basis point hike noted the tight labor market, the momentum of the economic activity being larger than anticipated, and the lack of signs that inflation would be brought back to the Committee's 2 percent objective. Even among those that were in favor of increasing rates, it was agreed that the pace of hikes should be reduced, including the four rate rises from consecutive meetings. After this meeting, Powell remarked to Congress that the central bank still has a long way to go to meet the goal, while also emphasizing unity among the FOMC members. In spite of this, some officials, such as Atlanta Fed President Raphael Bostic, stated that the current rate is sufficiently restrictive and the impact from the 10 hikes is yet to be seen. Data has been on the Fed's side, as the preferred inflation gauge saw just a 0.3% increase in May, while the labor market has also shown some signs of weakening. This has caused the Fed to focus on reducing the number of job openings in comparison to available workers, in order to lower the demand.
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