Fed Minutes Show Officials Agree That Committee Was Well Positioned To Wait For More Clarity

Federal Reserve officials agreed that the committee was well-positioned to wait for more clarity on the outlooks for inflation and economic activity, as economic growth and the labor market remained solid and current monetary policy stayed moderately restrictive.

According to the minutes of the FOMC meeting held in May, officials were of the view that uncertainty about the economic outlook had risen further, “making it appropriate to take a cautious approach until the net economic effects of the array of changes to government policies become clearer.”

“Almost all participants commented on the risk that inflation could prove to be more persistent than expected,” the minutes indicated.

Fed officials also stressed the importance of ensuring that longer-term inflation expectations remained well-anchored. Some also noted that expectations might be particularly sensitive because inflation had been above the Committee’s target for an extended period.

“A few participants additionally noted that higher uncertainty could restrain business and consumer demand and that inflationary pressures could be damped if downside risks to economic activity or the labor market materialized,” the minutes said.

Fed officials also highlighted that the Committee might face difficult trade-offs if inflation proves to be more persistent while the outlook for growth and employment weakens.

During its May policy meeting, the central bank maintained its benchmark overnight borrowing rate unchanged in the range of 4.25% to 4.5%, where it has been since December.

Meanwhile, benchmark indices traded mixed following the release of the minutes. The SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500, traded 0.21% lower on Wednesday, while the Invesco QQQ Trust, Series 1 (QQQ), which tracks the Nasdaq Composite, was up 0.05%.

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