Federal Reserve officials discussed the progress of inflation during their June meeting and concluded that while it is moving in the right direction, more evidence is needed before they consider lowering interest rates. The meeting minutes revealed that participants want to see additional data that gives them greater confidence that inflation is sustainably moving toward the 2 percent target.
Although there was some disagreement among the 19 central bankers present, with some leaning towards raising rates if necessary, the majority agreed to keep rates unchanged for now. The Fed’s target of 2% annual inflation has been consistently above that level since early 2021, but officials are still cautious and are waiting for more evidence of sustained progress.
During the meeting, policymakers also shared updates on economic projections and monetary policy for the coming years. The “dot plot” showed a slight decrease in the number of projected rate cuts by the end of 2024, indicating only one quarter percentage point cut. However, futures markets are still pricing in two cuts, starting in September.
While the committee left most economic projections unchanged, they did lower their inflation expectations for the current year. In discussions about monetary policy, some members emphasized the need to tighten policy if inflation persists, while others argued for readiness to respond to unexpected economic weakness.
The meeting minutes did not disclose specific views of individual members, but it was noted that a “number” of participants expressed certain opinions, indicating more than “several.” The majority of officials see economic growth gradually slowing and consider current policy to be “restrictive,” balancing the need to bring down inflation without causing economic harm.
Since the meeting, Federal Reserve officials have maintained a cautious approach, emphasizing the importance of data dependency in decision-making. However, there have been signals from Chair Jerome Powell and other officials that continued positive inflation readings could lead to a reduction in interest rates.
During an appearance in Portugal, Powell mentioned that the risks of cutting rates too soon versus too late have become more balanced. Previously, officials had stressed the importance of not easing off the inflation fight prematurely. This shift in tone suggests a possible change in the Fed’s approach in the near future, depending on economic data and inflation trends.
