Zhitong Financial APP learned that according to the minutes of the meeting released on Wednesday, the Federal Reserve** said at the interest rate meeting at the end of January that they are not in a hurry to cut interest rates and are optimistic and cautious about the inflation performance.
At the last meeting, policymakers not only decided to keep the key overnight lending rate unchanged, but also revised the post-meeting statement to say that they would not cut rates until the Fed, the rate-setting body, has "greater confidence" that inflation has receded.
"Most participants pointed to the risk of rushing to ease policy stance and stressed the importance of carefully assessing new data when judging whether inflation is falling to 2% on a sustained basis," the minutes showed. ”
The minutes did indicate a general optimism that the Fed's policy moves had succeeded in bringing down inflation, which reached its highest level in more than 40 years in mid-2022.
However, they noted that they would like to see more data before starting to ease policy, while saying that an interest rate hike is likely to happen.
In discussing the policy outlook, participants judged that the policy rate may have reached the apex of this tightening cycle," the minutes showed. However, "participants generally noted that lowering the target range for federal** interest rates may not be appropriate until they gain more confidence that inflation is moving towards 2% on a sustained basis." ”
Ahead of the meeting, a series of reports noted that inflation is gradually returning to the Fed's 2% target, although it remains high. While the minutes assessed the "substantial progress" that was being made, the Committee considered some of that progress to be "exceptional" and possibly due to factors that would not be sustainable.
As a result, members said they would "carefully evaluate" the incoming data to gauge the long-term trajectory of inflation. They are aware of upside and downside risks and are concerned about cutting rates too soon.
The Fed highlights uncertainty and remains concerned about high inflation.
Participants highlighted the uncertainty of how long the restrictive monetary policy stance will need to be maintained.
The minutes said they "remain concerned that high inflation continues to hurt households, especially those who cannot afford it." While the inflation data pointed to significant deflation in the second half of last year, participants observed that they would carefully evaluate the incoming data to judge whether inflation was moving towards 2% on a sustained basis.
The minutes reflect an internal debate about how quickly the Fed will want to move in the future, given the uncertainty about the outlook.
Caution has been evident since the Jan. 30-31 meeting, as separate readings for consumers and producers** showed higher-than-expected inflation and remained well above the Fed's 12-month target of 2%.
In recent weeks, a number of ** have said they will take a cautious approach to easing monetary policy. Steady economic growth, 2023 to 2The annualized growth rate of 5% encouraged FOMC members to believe that the 11 rate hikes implemented in 2022 and 2023 did not materially hinder growth.
On the contrary, the U.S. labor market continued to expand at a blistering pace, adding 3530,000 non-farm jobs. According to the Atlanta Fed, economic data so far for the first quarter so far points to a GDP growth rate of 29%。
In addition to discussing interest rates, members also mentioned bond holdings on the Fed's balance sheet. Since June 2022, ** banks have allowed more than 1$3 trillion in U.S. Treasuries and mortgage-backed loans** mature without regular reinvestment.
Adequate level of reserves.
The minutes indicate that there will be more in-depth discussions at the March meeting. Policymakers also indicated that they are likely to take a "slow" approach to the process of "quantitative tightening" at the January meeting. The relevant question is what level of reserve holdings are needed to meet the needs of banks. The Fed considers the current level to be "sufficient".
Some participants noted that, given the uncertainty in the estimate of the level of abundant reserves, a slowing down in the pace of liquidity reduction could help a smooth transition to that level of reserves, or it might allow the Committee to continue with balance sheet reduction for a longer period of time," the minutes said. In addition, some participants noted that the process of balance sheet reduction is likely to continue for some time even after the Committee begins to lower the target range for federal** interest rates. ”
The Fed** believes that the current policy is restrictive, so the big question going forward will be how much policy will need to be eased in order to support economic growth and control inflation.
Some worry that economic growth is still too fast.
In January, the consumer index fell by 3 on a 12-month basis1% and 3 if food and energy are not included9%, while the latter saw a significant decline in the month. Data from the Atlanta Fed shows that the so-called sticky CPI (i.e., housing and other less volatile**) is 46%。Producers** increased by 03%, well above Wall Street expectations.
A few days after the FOMC meeting, Fed Chair Jerome Powell said: "With the economy performing strongly, we feel it is prudent to consider when to start lowering interest rates." He added that he was looking for "more evidence that inflation is consistently coming down to 2%." ”
Since then, the market has had to readjust its expectations for a rate cut. In the federal*** market, traders were all but certain that a rate cut would be cut in March, but this has now been pushed back to June. The level of expected rate cuts has been reduced from six to four for the year. The FOMC** will cut rates three times in December.
This article is from: Zhitong Financial Network.