Source: Wall Street See
Some FOMC members pointed out that if the job vacancy rate drops to 4.5%, it may have already approached or exceeded certain thresholds, meaning that the future unemployment rate will rise more sharply. Most members believe that as the economy gradually cools down, the huge economic pressures faced by low-income households are a major concern for the Fed.
The minutes of the June meeting released overnight showed that the Fed has not yet fully established confidence in rate cuts.
Analysts at UBS Group, including Jonathan Pingle and Amanda Wilcox, pointed out in their latest report that FOMC emphasized three times during the meeting that they needed more favorable data to strengthen their confidence in achieving the 2% inflation target. FOMC mentioned inflation once and monetary policy twice during the discussion.
The minutes of the meeting stated,
When discussing the outlook for monetary policy, participants pointed out that the slowdown in inflation this year was slower than they had expected in December last year. They emphasized that they should not lower the target range for the federal funds rate until more information gave them confidence that inflation was moving sustainably toward the Committee's 2% target.
The labor market remains strong.
Despite the slowing economic growth, FOMC members generally believed that the labor market remained strong. However, there were differences among members about the outlook for the labor market.
Some members mentioned that although wage growth last year may have been overestimated, employment growth remained stable. But some members also warned that a slowing expansion of the labor market could lead to higher layoff rates, which could have a significant impact on the labor market.
The minutes of the meeting specifically emphasized the Beveridge curve. In economics, the Beveridge curve is used to describe the relationship between the unemployment rate and the job vacancy rate. Generally, when the job vacancy rate increases, the unemployment rate decreases because there are more job opportunities for job seekers to choose from.
The minutes of the meeting showed that FOMC members closely monitored the dynamics of the Beveridge curve, with some members pointing out that if the job vacancy rate fell to 4.5%, it might have approached or exceeded certain thresholds, meaning that the future unemployment rate would rise more "non-linearly" (sharply).
However, UBS pointed out the limitations of this view. First, it ignored the fact that when the job vacancy rate was 6.0%, the unemployment rate actually increased rapidly and has since risen by 0.6 percentage points.
UBS believes that a slowdown in the expansion of the labor market usually leads to more layoffs, which is a normal economic phenomenon and should not be surprising. In contrast, FOMC seems to believe that the labor market can remain "strong" even if the expansion slows down.
UBS also mentioned that for most of the past 50 years, the US labor market has operated with a job vacancy rate below 4.5%, and there has been no "non-linear" increase in the unemployment rate.
Major concern - economic pressure faced by low-income families.
The minutes of the meeting pointed out that FOMC members noticed that the economic pressure faced by low-income families was a major concern. The "vast majority" of participants believed that economic growth was "gradually cooling", which could indirectly affect low-income families.
On monetary policy, FOMC members had different opinions on the current stance of monetary policy. Most members believed that monetary policy was restrictive, but not "almost all" members agreed on this.
When discussing the possibility of future rate adjustments, FOMC members had different views.
Some members emphasized the need for patience to allow the existing restrictive policy stance to further suppress overall demand and inflationary pressures. Other members warned that if inflation continued to be high or rose further, it might require raising interest rates.
Editor / jayden