Source: Wall Street News Author: Li Dan

The recently released minutes of the Fed meeting reiterate the wait-and-see stance of Fed decision-makers. At last month's meeting, they felt that they needed more data information to confirm their confidence in starting to lower interest rates, and most people believed that the U.S. economy was cooling down. In terms of product structure, the operating income of products with a range of 10-30 billion yuan is 401/1288/0.06 billion yuan respectively.

Nick Timiraos, a well-known financial journalist known as the "New Fed Communications Agency," subsequently wrote an article titled "Fed officials hinted not to hurry to cut interest rates." The article began by saying that because of high inflation, Fed officials did not have enough confidence to lower interest rates. Some policymakers at last month's meeting called for closer attention to signs that the labor market may be weakening faster than expected.

The article points out that the minutes show that Federal Reserve officials are generally satisfied with a wait-and-see stance. Combined with recent public communications from Federal Reserve officials, the minutes suggest that the Fed's meeting at the end of this month may not decide to cut interest rates.

Timiraos also posted a comment on social media stating that although the minutes did not provide a clear signal of policy direction, the discussion of changes in inflation and the labor market situation was almost inconclusive, and the Fed feared the economy was overheating or that policies were too loose. He cited the minutes as showing that firms contacted by Fed officials revealed that their pricing power had declined.

It is emphasized that it is not suitable to cut interest rates until there is more confidence in a sustained decline in inflation.

The minutes of the Fed's FOMC meeting, which were released on Wednesday, July 3rd, Eastern Time, showed that at the last meeting of the FOMC monetary policy committee on June 12th, attending Fed officials pointed out when discussing the outlook for monetary policy that progress in lowering inflation this year was slower than they expected last December. They emphasized that unless they have more confidence in the sustained decline in inflation after obtaining more information, it is not appropriate to cut interest rates. The minutes stated:

"They (attending officials) emphasized that they expect that it will not be appropriate to lower the target range for the federal funds rate until they are more confident that inflation is running at or below the Committee's symmetric 2 percent objective. "

Immediately after this sentence, the minutes stated that the attendees emphasized an important point in discussing their individual views on policy rates, namely, that future decisions should be based on upcoming data, changing economic outlooks, and risk balances.

Several attendees pointed out that financial markets' responses to data and feedback they received from contacts indicated that the FOMC's policy approach was broadly understood.

Some attendees suggested that by emphasizing the FOMC's dependence on data in formulating policy decisions based on economic developments rather than on predetermined paths, the FOMC's response function might be further clarified. Several attendees indicated that providing more information about the FOMC's views on the economic outlook and its risks would improve the public's understanding of FOMC decisions.

Many people believe that if inflation remains high or rises further, it may be necessary to raise interest rates.

When discussing the risk management considerations that may affect the policy outlook, attendees believed that with the easing of the tight labor market and the past year's decline in inflation, achieving the Fed's employment and inflation goals has become more balanced. Monetary policy will be able to cope well with the risks and uncertainties when fulfilling the dual mission of employment and inflation. The minutes stated:

"A majority of attendees (The vast majority of) believed that the growth of economic activity appears to be gradually slowing, with most attendees (most of) indicating that the current stance of policy is likely to remain appropriate. "

Some attendees noted that there was uncertainty about the degree of policy restrictions at present. Some attendees indicated that the sustained strength of the economy and other factors may mean that the long-run equilibrium interest rate is higher than previously assessed, in which case the stance of monetary policy and overall financial conditions may not be as restrictive as they appear.

Several attendees pointed out that compared to evaluating the current stance of policy restrictions, the long-run equilibrium interest rate is a better guide to how policy rates might need to change in the long run. Attendees also noted that the economic outlook and the restrictive policy stance remain uncertain.

Some attendees emphasized the need to wait patiently for the FOMC's restrictive policy to curb total demand and further ease inflationary pressures. Several attendees indicated that if inflation remains high or rises further, it may be necessary to raise interest rates.

Many people believe that monetary policy should be prepared to respond to unexpected economic weakness.

The minutes stated:"A number of attendees indicated that monetary policy should be prepared to respond to unexpected economic weakness."

Immediately after this sentence, the minutes stated that several attendees specifically emphasized that as the labor market normalized, further weakening of demand might now have a greater impact on unemployment than earlier, with recent declines in labor demand being reflected more in reduced job openings.

With regard to changes in the inflation situation, the minutes stated that attendees believed that although the inflation rate remained high, there had been some modest further progress towards the Fed's 2% target in recent months.

Attendees noted some clear progress, including the month-to-month changes in the core PCE price index, the decline in the average inflation rate in April, and additional evidence from May CPI data. Recent data also showed improvements in inflation across a range of price categories, including market-based services.

Deploying AI technology in business may increase productivity and help reduce inflation.

The minutes mentioned that when discussing inflation prospects, attendees emphasized various factors that could help reduce inflation in the next period, including continued easing of supply and demand pressures in product and labor markets, the lagged impact of previous monetary tightening on wages and prices, delays in measuring the reaction of housing prices to changes in the rental market, and the prospect of further improvement in the supply side.

Among them, the prospect of improvement in the supply side includes the possibility that businesses deploying AI-related technologies may increase productivity.

Attendees observed that long-term inflation expectations remain well anchored and believe that this stability is the basis for the downward trend in inflation. Attendees confirmed that more favorable data is needed to strengthen their confidence in continued progress toward 2% inflation.

Editor/Lambor