U.S. FOMC Meeting Minutes (June 11-12, 2024)

Fed minutes reinforce the Fed's cautions approach to lowering interest rates

• The minutes from the June 11-12, 2024 Federal Open Market Committee (FOMC) acknowledged the recent progress made on inflation, but continued to highlight the upside risks to the inflation outlook. 
• On the recent inflation readings, Committee members noted that, "there had been modest further progress toward the 2 percent goal in recent months." Participants also noted that long-term inflation expectation remained anchored, which was imperative to the disinflationary process.
• When discussing the appropriate policy actions, participants noted that "in light of current economic conditions and their implications for the outlook for employment and inflation, as well as the balance of risks, it was appropriate to maintain the target range for the federal funds rate at 5¼ to 5½ percent." 
• On future policy decisions, participants continued to note that they would depend "on incoming data, the evolving economic outlook, and the balance of risks." Several members cited a willingness to increase rates should inflation persists at current levels or increase.
• In examining the risks associated with the current policy stance, members noted that with "the risks to the Committee’s dual-mandate goals having now come into better balance, labor market conditions would need careful monitoring."  

Key Implications

• Today's minutes continued to reinforce the Fed's data dependent approach to easing their policy stance. Despite progress on inflation stalling over the first quarter, recent inflation prints have been encouraging. But, they are unlikely to give the Fed the confidence it needs to begin lowering its policy rate. This was echoed by Chair Powell this week acknowledging the progress made on inflation, but stressing the need to see continual good data prints before easing policy. 
• With economic growth slowing from the torrid pace set in 2023, the risks facing the Fed as they decide when to ease their policy stance have become more two-sided. Prematurely easing could risk delaying inflation returning to target, while maintaining rates at their current level for too long could result in a deterioration in the economic backdrop. We believe that the economy will continue coming into better balance, in line with the Fed's expectations, setting the stage for the Fed to begin lowering interest rates in the fourth quarter.    

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