Federal Reserve officials, based on the minutes from their recent meeting, have expressed concerns about the ongoing pace of inflation and indicated that additional rate hikes might be necessary unless conditions change. The July meeting led to a quarter percentage point rate hike, which is generally perceived to be the last in the current cycle. However, the minutes revealed that most members are wary that the fight against inflation is not yet concluded and might require further tightening actions.
While some officials have suggested after the meeting that future rate hikes might not be needed, the minutes urged caution. The minutes indicated that there is considerable uncertainty surrounding the direction of policy. There’s consensus that inflation is “unacceptably high,” but there are also tentative signs that inflation pressures could be moderating.
The minutes noted that the economy is expected to slow, and unemployment is projected to rise somewhat. However, earlier concerns about troubles in the banking industry causing a mild recession this year were retracted. Commercial real estate, specifically the risk of a sharp decline in valuations, remains a point of concern.
The central bank’s favored inflation measure, the personal consumption expenditures price index excluding food and energy, stood at 4.1% in June, and policymakers are cautious about declaring victory over inflation too soon. Despite rate hikes, economic growth and employment have remained robust. Some Fed officials have recently indicated that while rate hikes may be over for the year, rate cuts are unlikely as well. Market expectations also lean towards no further rate hikes this year.
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