Federal Reserve officials are currently expressing confidence in a steady downward trajectory of inflation in the United States and that the US labor market remains strong.
The mentioned position of the specified financial regulator is stated in the minutes of the Fed’s November meeting. This document was published on Tuesday, November 26.
Fed officials assess the current dynamic of inflation and the present state of affairs in the labor market as conditions that allow the US central bank to continue easing monetary policy. At the same time, in this case, is implied the priority of the approach envisages a gradual pace of committing the mentioned process.
The meeting summary contains many statements according to which officials of the central bank of the United States are satisfied with the current rate of inflation. It is worth noting that the corresponding sentiments are observed, although the mentioned indicator exceeds the Fed’s target of 2%. Currently, the inflation in the United States is 2.6%.
Federal Open Market Committee members indicated that further interest rate cuts are likely to occur, but did not specify exactly when and on what scale. They are confident that the employment situation in the United States remains fairly solid.
In the meeting summary, it was noted that when discussing the prospects for monetary policy, participants anticipated that a gradual move to a more neutral strategy would be advisable if inflation continues to decline to 2% steadily and the economy remains near maximum employment.
At the November meeting, the FOMC voted unanimously to take down its benchmark borrowing rate by a quarter percentage point to a target range of 4.5%-4.75%.
Currently, the markets are dominated by the expectation that next month the central bank of the United States will make another decision on lowering the cost of borrowing. At the same time, it is worth noting that the corresponding expectations have weakened against the background of the intentions of Donald Trump, who won the election of the president of the United States, to impose tariffs on imported goods. According to many experts, the implementation of the relevant plans may provoke an accelerated increase in inflation.
It is worth noting that in the minutes of the November Fed meeting, there was no mention of the election of the President of the United States. This meeting took place two days after the end of the elections. Donald Trump will return to the White House in January. In addition to the above-mentioned worries regarding intentions about tariffs, some experts expressed concerns about Mr. Trump’s migration policy, which may turn out to be much tougher than the current configuration of Washington’s approach to the relevant aspect of the country’s functioning system. According to several analysts, the tightening of the mentioned policy will become a factor of negative impact on the situation in the space of the economic system of the United States.
The minutes of the Fed’s November meeting also did not mention the potential fiscal policy of Donald Trump. Some experts warn that Mr. Trump’s plans for tax cuts and aggressive deregulation could have a significant impact on the economic situation in the United States.
At the same time, US central bank officials did note a general level of uncertainty about how conditions are evolving. They also stated uncertainty about when it will be necessary to stop the process of lowering the cost of borrowing before the Fed hits the so-called neutral interest rate, which will neither stimulate nor restrain economic growth.
Conflicting signals about inflation in the United States and uncertainty about Donald Trump’s policies have caused traders to revise their forecasts about the likelihood of further interest rate cuts. Currently, markets estimate that there is less than a 60% possibility that the Fed will decide in December to continue lowering the cost of borrowing. In this case, interest rates are expected to be cut by just three-quarters of a percentage point in reductions through the end of 2025.
During the November meeting, Fed officials seemed to be focused on discussing progress in countering inflation and a generally stable economic outlook.
Recently, US policymakers have expressed confidence that current inflation readings are being boosted by shelter cost increases. Shelter cost is expected to slow as the pace of rent rises eases.
The participants of the November Fed meeting also demonstrated their commitment to the view that inflation is steadily returning to the 2% mark, although month-to-month movements will be volatile. Moreover, during this meeting, statements were made regarding concerns about the state of affairs in the US labor market, which does not negate the overall confidence of officials of the country’s central bank that the situation in the mentioned space is generally solid. Nonfarm payrolls increased by just 12,000 last month. This moderate upward dynamic has been attributed primarily to storms in the Southeast and labor strikes.
