(Washington) Several members of the US Federal Reserve’s (FOMC) monetary policy committee had spoken in favor of another rate hike at their last meeting on June 13-14, before finally voting for a break , according to the report published on Wednesday.
At the end of this meeting, “virtually all” of the FOMC members voted in favor of the pause, but also considered that additional hikes would be necessary in order to bring inflation back to its target of 2% per year. .
At the end of June, the PCE index stood at 3.8% year on year at least in May, its lowest level since the start of 2021.
Nevertheless, the deceleration of inflation is taking place at a slower pace than the Fed would like, while its chairman, Jerome Powell, estimated on June 28 that it could not return to its target until 2025.
Participants felt that the pause in rate hikes, which are currently in a range between 5% and 5.25%, was necessary in order to take more time to ensure the transmission of monetary policy decisions in the economy.
On average, it is indeed considered that this transmission is done with a lag of about nine months, recalled Mr. Powell last week.
For supporters of a rate hike, the indicators show only “few clear signs that inflation is on track to return to the 2% target”, while the job market ” remained very constrained and the economy stronger than anticipated so far,” according to the minutes.
“Do we need to do more in terms of monetary policy? I think the available data points in that direction,” New York Fed President John Williams told a conference on Wednesday.
In the first quarter of the year, the US economy grew by 2%, according to the final estimate, well above the preliminary estimate (1.1%) and market expectations.
But signs of a slowdown have multiplied in recent weeks: manufacturing activity contracted in June, for the eighth month in a row, with demand remaining weak and prices trending lower, according to trade federation ISM. .
Similarly, household spending stalled in May, according to the Commerce Department.
Jerome Powell has repeatedly stressed that future Fed decisions will be based on published data, a position also underscored by the minutes.
According to Fed economists, it is still possible to see the US economy suffer a “mild recession” late this year and early next year, while pointing out that the possibility of mild growth during this period, despite further rate hikes, was also possible.
Minutes from the central bank’s latest meeting came as little surprise to the New York Stock Exchange, which ended slightly lower on Wednesday.
The next Fed meeting is scheduled for July 25-26.