An American flag flies at the entrance to the New York Stock Exchange on Wall Street in New York City on Wednesday. The S&P 500 and Nasdaq closed at record highs during a shortened trading day ahead of the Independence Day holiday. Photo: John Angelillo/UPI The Federal Reserve has been above its target of 2% annual inflation since 2021. That means the Fed can cut interest rates once it hits its end goal of 2% inflation, the chairman argued last month. Photo: John Angelillo/UPI Federal Reserve Chairman Jerome Powell was visiting Portugal on Tuesday and spoke about balancing the risks of cutting interest rates too soon and causing inflation to spike, versus the risks of cutting rates too late and benefiting economic growth. “Our economy has made considerable progress,” Powell said last month. Photo: Jemal Countess/UPI
July 3 (UPI) — Federal Reserve officials said in a summary of their June meeting released Wednesday that inflation is moving in the right direction but not fast enough to justify lowering interest rates, and they will not be cutting interest rates anytime soon.
“Participants confirmed that further favorable data are needed to increase confidence that inflation is sustainably moving toward 2 percent,” said the 10-page minutes of the June 11-12 Federal Open Market Committee (FOMC) meeting released by the Fed on Wednesday.
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The Federal Reserve has been above its target of 2% annual inflation since 2021. That means the central bank can cut interest rates once it hits its ultimate goal of 2% inflation, the Fed's chairman argued last month, but minutes released on Wednesday show officials are in no rush to cut rates.
Economic forecasts were little changed, but inflation expectations for this year were lowered, according to the minutes.
According to the minutes, information available at the time of the meeting suggested that U.S. economic activity had been “expanding at a solid pace so far this year.”
“Several participants noted that the target range for the federal funds rate may need to be raised if inflation remains elevated or rises further,” the minutes said. “Several participants noted that monetary policy should remain prepared to respond to unexpected economic weakness.”
Since January, the Fed has said the U.S. economy is growing slowly but steadily amid record inflation and has kept interest rates roughly steady while it reviews economic data.
On Tuesday, Federal Reserve Chairman Jerome Powell, who was visiting Portugal, spoke about the balance between cutting interest rates too soon and risking a spike in inflation, and cutting rates too late and hurting economic growth.
Last June, the Fed left its key interest rate on hold and said it could cut it once by the end of the year, but Chairman Powell told reporters at the time that while inflation had fallen to 2.7% from a high of 7%, it was still “too high.”
Last month's Fed meeting reflected that the Bank of Canada and the European Central Bank had begun their rate-cutting cycles at that time, “as generally expected,” the Fed said. The ECB cut its three key interest rates by 25 basis points, citing falling inflation.
“Our economy is making substantial progress toward both objectives,” Powell said last month, adding that the Fed was keeping current interest rates unchanged and increasing sales of its securities holdings.
He added that the Fed stands ready to adjust as needed depending on market conditions and changing economic conditions.