Fed officials still confident inflation will ease but willing to tighten if needed

Markets signal reduced odds of more than one rate cut this year following the release of minutes from latest monetary policy meeting.

Federal Reserve
Federal Reserve
(Pro Farmer)

Even as they acknowledged it would take longer than expected to get inflation to the 2% target, Federal Reserve officials indicated they still had confidence price pressures would ease, according to the minutes of the last monetary policy meeting. However, many participants were uncertain about the level of restrictiveness of monetary policy given the strength of the economy.

While some Fed officials, including Chair Jerome Powell, have signaled a rate hike was not likely needed, “various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.”

After the minutes were released, traders’ attitudes reflected reduced odds of more than one interest rate cut this year. Fed fund futures showed less than 60% chances of a rate cut starting in September and about 50/50 odds of a second reduction in December. Those were down slightly from prior to the monetary policy meeting minutes being released.