On February 21, Eastern time, the Federal Reserve released the minutes of its January 2024 interest rate meeting. The minutes showed that most participants pointed to the risk of easing policy stance too quickly and stressed the importance of carefully assessing upcoming data releases to determine whether inflation is falling to 2% on a sustained basis.
At the January 2024 meeting, all participants agreed to maintain the target range for the Federal** interest rate at 5., the minutes showed25% to 55% is appropriate. Participants noted that recent indicators suggest that economic activity has been expanding at a solid pace. Job growth has slowed since the beginning of last year, but remains strong and the unemployment rate remains low. Inflation has eased over the past year, but remains elevated. Participants also noted that risks to achieving employment and inflation targets are being better balanced and that the Federal Open Market Committee (FOMC) remains highly concerned about inflation risks.
In discussing the policy outlook, participants judged that the policy rate is likely to be at the peak of the current tightening cycle. Participants agreed that they will carefully assess upcoming data, the changing outlook, and the balance of risks when considering any adjustments to the Federal** interest rate target range. Participants agreed that until they have greater confidence that inflation is moving towards 2% on a sustained basis, they expect a downward adjustment of the target range to be inappropriate.
Participants highlighted the uncertainty of how long the restrictive monetary policy stance needs to be maintained. Most participants pointed to the risk of easing policy stance too quickly and stressed the importance of carefully assessing upcoming data releases to determine whether inflation is falling to 2% on a sustained basis. Several participants also pointed out that maintaining an excessively restrictive stance for too long would pose downside risks to the economy.
Participants agreed that they will continue to monitor the impact of upcoming information on the economic outlook when assessing appropriate monetary policy stances. They will be prepared to adjust their monetary policy stance appropriately if risks arise that could hinder the achievement of the Committee's objectives. The commissioners also agreed that their assessment would take into account a wide range of information, including data on labor market conditions, inflationary pressures and inflation expectations, as well as the financial and international development situation.
Notably, given that the stress that had been seen at some banks early last year had subsided, the commissioners agreed to remove from the statement references to the resilience of the U.S. banking system, tightening financial and credit conditions, and their impact on the economic outlook.
When discussing the economic outlook, the participants' economy was slightly stronger than it was in December 2023, as the upward revision to GDP growth in 2023 implied by the upcoming data raised the level of GDP throughout the period. The lagged effects of previous monetary policy actions will continue to lead to tighter financial and credit conditions and are still expected to push GDP growth in 2024 and 2025 below the Committee's estimate of potential growth; By 2026, GDP growth is expected to be in line with expectations. The ** path of the unemployment rate is revised slightly downward, reflecting an upward revision of the GDP level. Both headline personal consumption expenditures (PCE) and core personal consumption expenditure** inflation are expected to decline in 2024 as demand for products and labor markets become more balanced. Headline and core PCE** inflation is expected to approach 2% by 2026.
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