FOMC Meeting Minutes: Many policymakers would have preferred to remove the phrase “easing bias” directly from the policy statement.
Most participants noted that if inflation proves persistent, further rate hikes could be warranted.
An overwhelming majority of participants indicated that if inflation continues to run above 2%, some degree of policy tightening may become appropriate in the future.
Participants generally agreed that persistently elevated inflation and heightened uncertainty stemming from developments in the Middle East could necessitate maintaining the current policy stance longer than previously anticipated.
Only a small minority of participants believed that lowering the federal funds rate (i.e., cutting rates) would be appropriate only upon clear evidence that inflation is firmly on a path back toward target.
Virtually all participants supported maintaining the target range for the federal funds rate unchanged at this policy meeting.
Participants broadly observed that the conflict in the Middle East could significantly affect the overall risk balance and the appropriate path for monetary policy.
Several participants noted that if the conflict were resolved quickly and inflationary pressures fully dissipated, rate cuts later this year would be reasonable.
Some participants also expressed deep concern about an alternative scenario in which high energy prices and tariff barriers could cause inflationary pressures to become more entrenched across a broader swath of the economy.
Federal Reserve staff’s forecast for the economic outlook was slightly stronger than the projection made at the March policy meeting.
“Fed Whisperer”: Rate Cut Discussions Nearly Over; Fed Begins Seriously Considering Rate Hike Possibility
Nick Timiraos, known as the 'Fed’s megaphone,' stated that Federal Reserve officials have almost entirely stopped discussing the issue that dominated policy debates over the past two years—whether to cut interest rates—and instead began seriously considering the opposite direction at their most recent meeting: whether rate hikes might be necessary. The minutes from the April policy meeting noted: 'Most participants emphasized that if inflation remains persistently above 2%, further policy tightening could become appropriate.' The April meeting was Chair Powell’s final one as head of the Fed, and its minutes highlighted how the conflict in the Middle East has reshaped the interest rate decision-making committee’s outlook. Waller will assume leadership of the committee after being sworn in at the White House on Friday.
Editor/Liam