On Wednesday (July 3rd) Eastern Time, the Federal Reserve released the minutes of the Federal Open Market Committee (FOMC) monetary policy meeting from June 11th to 12th. Policymakers said that although inflation is moving in the right direction, it is not fast enough for them to lower interest rates.

The minutes show that the Fed still chose to stay put, and the target range of the federal funds rate remained at 5.25% to 5.50%. In fact, the Fed has not adjusted interest rates since July last year.

In the June economic forecast report, Fed officials expected only one rate cut this year, but in March they predicted that there would be three rate cuts this year, a significant reduction in the number of times.

Emphasizing the need for more data to cool inflation

The minutes revealed the differences among central bank officials on interest rate decisions: some officials believed that raising interest rates might be a necessary step in the face of economic uncertainty; while others advocated that quick action must be taken to respond once economic growth slows or there are signs of weakness in the job market. Despite the different voices, the FOMC ultimately decided to keep interest rates stable to observe further economic developments.

In an in-depth discussion of the future direction of monetary policy, Fed officials at the meeting pointed out that inflation has not fallen as fast this year as they expected in December last year. They stressed that rate cuts are only considered appropriate policy options when more data support is obtained to ensure that inflation will continue to fall to the target level set by the Fed.

It is noteworthy that on the same day that the Fed announced its June interest rate decision, the U.S. Department of Labor released May CPI data, which were generally lower than expected. Fed officials affirmed this, believing that the report further confirmed that inflation is gradually falling and provided strong data support for their policy decisions.

Several people think that interest rate hikes may be needed

The minutes wrote: The vast majority of participants believed that the growth of economic activity seemed to be gradually cooling down, and most participants said that they believed that the current policy stance was restrictive.

Some participants emphasized the need to wait patiently for the FOMC's restrictive policies to curb aggregate demand and further ease inflationary pressures. Several participants pointed out that if inflation remains high or rises further, interest rate hikes may be needed.

Many people advocate monetary policy to deal with economic weakness

The minutes wrote: "Many participants pointed out that monetary policy should be ready to respond to unexpected economic weakness." Many people in the meeting emphasized that the decline in market demand for labor has a greater impact on unemployment than expected.

Participants believe that as the tightness of the US labor market has eased and inflation has fallen over the past year, the risks of achieving the Fed's employment and inflation goals have become more balanced, and monetary policy will be able to deal well with the risks and uncertainties faced in achieving the dual mission of employment and inflation.

AI may be a means to help reduce inflation

Participants explored the outlook for inflation in depth and highlighted several key factors that are expected to drive down the inflation rate in the coming period. They mentioned that supply and demand pressures in product and labor markets are gradually easing, which will help ease the pressure of rising prices. In addition, the lagged effects of the previously implemented monetary tightening policies on wages and prices will gradually emerge, providing support for the reduction of inflation. In addition, they also paid attention to the fact that there is a certain delay in the response of housing price changes to the rental market, which may have an impact on inflation in the future.

It is worth mentioning that participants believe that the deployment of artificial intelligence-related technologies in the production process by enterprises can not only improve production efficiency, but also become a new driving force for reducing inflation. Through the use of intelligent technologies, companies can manage costs more effectively and optimize resource allocation, thereby generating a chain reaction of reducing costs and prices throughout the economic system.

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