Photo/VCG

On June 12th, local time, the latest minutes from the Federal Open Market Committee (FOMC) monetary policy meeting revealed that the Federal Reserve decided to maintain the federal funds rate target range at 5.25% to 5.50% for June.

According to the Federal Reserve’s policy statement, inflation has eased over the past year but remains high. There has been “some further progress” towards the 2% inflation target in recent months. The statement said that the committee seeks to achieve full employment and a 2% inflation rate over a longer period. The committee believes that the risks to achieving employment and inflation targets have become more balanced over the past year. The economic outlook is uncertain, and the committee remains highly focused on inflation risks. To achieve its goals, the committee decided to keep the federal funds rate target range unchanged.

Furthermore, according to the economic outlook projections released by the Federal Reserve, the federal funds rate is expected to be 5.1% at the end of 2024, 4.1% at the end of 2025, 3.1% at the end of 2026, with a long-term federal funds rate projected at 2.8%. It is anticipated that there will be only one rate cut in 2024.

On the same day, Federal Reserve Chairman Jerome Powell stated in a press conference that although inflation has significantly decreased, the current data has not yet given the Federal Reserve “more confidence” in approaching the 2% target. Despite the Consumer Price Index in May being lower than expected, the Federal Reserve does not yet have the confidence to begin cutting rates. The Federal Reserve generally expects GDP growth to slow compared to last year, with employment growth remaining strong but slower than in the first quarter. Additionally, Powell noted that no one in the committee has forecasted a need to raise interest rates.

Powell pointed out that the U.S. economy has made progress towards achieving the Federal Reserve’s two goals—reducing the inflation rate to 2% and maximizing employment. Powell said that the inflation rate has dropped significantly from around 7% to 2.7%, but it is still too high. The Federal Reserve will maintain a tight monetary policy stance, “needing to see more good data to strengthen confidence that the inflation rate can sustainably move towards 2%.”

Powell also mentioned that the Federal Reserve’s restrictive stance on monetary policy is having the effect on inflation that Federal Reserve officials want to see, and the evidence is very clear. However, he added that Federal Reserve officials are still waiting for better progress.