Fed concludes that inflation decreased, but will monitor data to ensure progress

Officials of the Federal Reserve They came to the conclusion a few weeks ago that the inflation is steadily declining, and they agreed to closely monitor incoming data to ensure the pace of price increases will continue to slow toward their 2% target, according to minutes of their meeting released Tuesday.

As a result, policymakers decided to leave their main benchmark interest rate unchanged but keep it elevated for an extended period. In a press conference after the meeting, Fed Chairman Jerome Powell left open the possibility of another interest rate hike, although most economists said they believe the central bank will not raise them again. .

At the meeting, held from October 31 to November 1, officials agreed that they would raise their main interest rate again if the economic data “they indicate that progress” towards the goal of 2% “It is insufficient”, the minutes indicate. This suggests that inflation would have to accelerate for the Federal Reserve to raise rates again.

The central bank’s decision to keep its short-term interest rate unchanged for the second consecutive meeting marked the longest pause in its rate hike campaign since it began raising rates in March 2022. Since then, the Fed has raised its reference rate 11 times, from almost zero to close to 5.4%its highest level in 22 years.

Minutes released Tuesday suggest that Fed policymakers are hopeful that upcoming data will confirm inflation is headed back toward its desired level. With signs that price pressures are cooling, Wall Street investors believe the central bank could begin cutting its policy rate as early as May, according to the CME Fedwatch Tool, a tool that provides probabilities. for the Fed to modify its rates.

Federal Reserve officials expect future economic data “will help clarify to what extent” inflation continued to fall, ““Demand was moderating.” and “labor markets were achieving a greater balance between demand and supply,” according to the minutes.

In any case, the officials “They emphasized that they would need to see more data indicating that inflationary pressures are decreasing” to ensure that the price increase was directed back towards its target of 2%.

Inflation has decreased from its peak 9.1% in June 2022 3.2% last month. The October report also showed that core prices, which exclude the volatile food and energy categories, cooled from September to October, and hinted that inflation is continuing to ease.