Members of the central bank's monetary policy committee want to see inflation progress toward the 2% target before lowering the price of money

 Members of the central bank's monetary policy committee want to see inflation progress toward the 2% target before lowering the price of money

The US Federal Reserve is in a wait-and-see phase. The US central bank cut the official rate by one percentage point between September and December 2024. At its January meeting, however, it paused its cuts and the members of its monetary policy committee are in no hurry to act again, according to the minutes of that meeting. Investors assume that the rate will remain in the 4.25%-4.50% range at the meeting on March 19 and, most likely, at the meeting on May 7.

“In discussing the outlook for monetary policy, participants noted that the Committee was willing to take its time in assessing the evolving outlook for economic activity, the labor market, and inflation, and the vast majority indicated a still-tight policy stance,” the minutes of the Federal Open Market Committee (FOMC) meeting held on January 28 and 29 state. “Participants indicated that as long as the economy remained near maximum employment, they would like to see further progress in inflation before making additional adjustments to the target range for the federal funds rate,” they add, while leaving the door open to possible changes in position based on new data.

“Participants indicated that, as long as the economy remained near maximum employment, they would like to see further progress in inflation before making additional adjustments to the target range for the federal funds rate,” the document states.

In the document, some of the Fed members indicate that they see the current level of official interest rates as close to neutral, that is, neither slowing nor boosting the economy. The majority still think it is restrictive. The minutes also marginally indicate concern about the possible inflationary effects of the tariffs promoted by the new president, Donald Trump, but without dwelling on that reflection for long.

Federal Reserve Chairman Jerome Powell himself conveyed during his recent appearances in the Senate and the House of Representatives that the economy is in good shape, that monetary policy is well positioned and that there is no rush to lower interest rates further. Inflation is having a hard time covering the last mile to the price stability target of 2% and Powell pointed out the importance of getting close to that level.

Artcile Members of the central bank's monetary policy committee want to see inflation progress toward the 2% target before lowering the price of money Published on Personal Finance Bytes.

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