(Washington) Economists at the U.S. central bank (Fed) said in minutes of the institution’s latest meeting released Wednesday that the U.S. economy was still heading for a “mild recession” at the end of of the year and early 2024.
Meeting participants had already anticipated a mild “in-year” recession at the previous meeting on March 22, this time seeming to expect it to occur later in the year.
On May 3, despite this advice from its economist teams and in a context of persistent tensions in the banking sector, the Fed’s Monetary Committee (FOMC) raised interest rates for the tenth time in a row, by a quarter of a percentage point.
The participants had justified this decision by the persistence of “inflation still much higher than the long-term objective of 2% and underlying inflation (which excludes food and energy prices, editor’s note) which shows only a few signs of moderation”.
The FOMC said inflation remained “at an unacceptable level” and that the decline seen in March was “less than expected.”
Inflation for the month of April, according to the PCE index which is the one taken into account by the Fed, must be published on Friday.
During a speech on Wednesday, one of the FOMC participants, Christopher Waller, said that “the data since the last meeting has not yet given a sufficiently precise idea” on whether a new rate hike.
The FOMC did not have a firm position in early May regarding a potential new hike, with some participants in favor while others felt that it would be more appropriate to wait to see the effects of the hikes already made.
“We have not made any decision as to the extent to which further policy strengthening would be appropriate,” Fed Chairman Jerome Powell said on Friday.
The next FOMC meeting is scheduled for June 13-14.
According to the CPI index, inflation slowed slightly again in April, to 4.9% over one year against 5% in March but had rebounded over one month.
Just over a quarter of market participants expect the Fed to raise rates in June, according to CME Group’s assessment.
