Inflation and economic uncertainty influence Fed policy decisions

News on May 25, according to the minutes of the Federal Reserve’s latest meeting released on Wednesday, Eastern Time, there were clear differences among Federal Reserve officials on whether to further raise interest rates in June. Participants raised doubts about the appropriateness of policy tightening and stressed the need to retain selectivity.

According to the editor’s understanding, the meeting discussed the impact of rising inflation and uncertainty on economic development on policy decisions. Rewritten as follows: The editor learned that the meeting discussed the impact of uncertainty in economic development and inflationary growth on policy formulation. Some participants said that while inflation is likely to continue to rise slowly to 2%, progress may still be unsatisfactory and further policy tightening may be needed at future meetings. However, some participants noted that if the economy develops on current trends, further strengthening of policies may not be necessary after this meeting.

Participants unanimously stated that they are firmly committed to returning the inflation target to 2% and continue to pay close attention to inflation risks. They emphasized the importance of a data-driven approach in policymaking and argued that it is crucial to closely monitor incoming information and assess its impact on monetary policy.

When discussing the policy outlook, participants generally believed that the extent of further increases in the target range after this meeting became uncertain due to the lagging effects of monetary policy and the potential impact of further tightening of credit conditions on the economy. Close monitoring of incoming information and assessment of its impact on monetary policy was seen as crucial by all participants.

The minutes also pointed out that participants discussed factors affecting future policy decisions, including the impact of policy tightening on economic activity and inflation, the impact of banking events on credit conditions, progress in returning inflation to target, and labor force Market conditions and the slowing pace of economic growth.

In terms of the banking industry, the minutes pointed out that participants believed that pressure in the banking industry may further drag down economic activity, but there is still a high degree of uncertainty about the extent of the pressure. According to Federal Reserve officials, they are ready to take measures to ensure that the financial system has sufficient liquidity. Although conditions in the banking sector have improved, uncertainty about the economic outlook remains relatively high, as they noted.

Participants emphasized the need to raise the U.S. debt ceiling in a timely manner to avoid serious chaos in the financial system and the entire economy. They called on authorities to continue to address issues related to market resilience and stressed that the orderly functioning of the U.S. Treasury market is critical. The U.S. Federal Reserve said it is ready to use liquidity and regulatory tools to reduce future financial stability risks.

Debt ceiling talks are at an impasse, even though the U.S. Treasury is expected to run out of cash as early as June 1. The two sides failed to reach a final agreement on raising the federal borrowing limit, with Republicans accusing Biden of lacking a sense of urgency in negotiations, while Democrats believed that Republicans were unwilling to compromise on a series of controversial issues, threatening the legislative prospects of the agreement.

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