Original title: Inflation concerns remain. The Federal Reserve may maintain high interest rates for a longer time

According to the meeting minutes released by the Federal Reserve Board on the 22nd, the Federal Reserve is worried about the current inflation situation in the United States, which means that the federal funds rate needs to stay at the current level for a longer time.

Inflation worries are hard to dispel

According to the minutes of the May monetary policy meeting released by the Federal Reserve on the 22nd, due to the disappointing inflation data and strong economic growth in the first quarter, it will take longer than expected to be sure that inflation will continue to ease.

The officials at the meeting noted that the components of US commodity and service prices have risen significantly recently, and the Federal Reserve has "lacked further progress" in achieving its long-term inflation target of 2%. If we want to achieve the inflation target, demand growth needs to slow down.

Nevertheless, officials of the Federal Reserve still believe that the current level of the federal funds interest rate is sufficient to restrain the economic activities of the United States and reduce inflation. Inflation is expected to return to the long-term target level of 2% in the future, suggesting that the Federal Reserve will continue to keep interest rates unchanged. But officials are uncertain about the time required to reach the goal and the impact of maintaining high interest rates on achieving the goal.

Some officials mentioned that if the inflation situation shows that further tightening of monetary policy is "appropriate", they will be willing to further raise interest rates.

The Federal Reserve held a monetary policy meeting from April 30 to May 1, and kept the target range of the federal funds rate between 5.25% and 5.5% for the sixth time in a row, the highest rate in 23 years. At the press conference after the meeting, Federal Reserve Chairman Powell said, "At present, the demand of the U.S. labor market is still strong, and inflation is growing faster than expected," it may be appropriate to postpone interest rate cuts ".

Christopher Waller, the director of the Federal Reserve, said on the 21st that in the absence of obvious weakness in the labor market, we need to see good inflation data for several months before we can determine our position in support of easing monetary policy.

According to the Federal Reserve's observation tool of the Chicago Mercantile Exchange, the market currently expects that the possibility of the Federal Reserve cutting interest rates by 25 basis points in September is about 60%, which is lower than before the release of the latest meeting minutes.

In addition, according to the data released by the Office for National Statistics on the 22nd, the year-on-year growth rate of the UK consumer price index (CPI) fell back to 2.3% in April, but it was still higher than the market expectation. Service inflation pressure only slightly declined, falling to 5.9% from 6% in March. The data stimulated the market to lower the expectation of the Bank of England to cut interest rates in June, and the Bank of England may still hold its ground in June.

Deterioration of people's financial situation

The latest minutes of the Federal Reserve meeting show that there is an upward risk of inflation, which puts pressure on consumers, especially low-income groups. People use more credit cards and "buy first, pay later" services, and the default rate of some types of consumer loans has increased.

The officials at the meeting worried that consumers would rely on more risky forms of financing to maintain their livelihoods due to the persistent inflationary pressure. Many participants pointed out that there were signs that the financial situation of low - and middle-income American families was increasingly under pressure. These officials believe that this is a downside risk to consumption prospects.

According to the 2023 U.S. Household Economic Situation Report released by the Federal Reserve on the 21st, most American adults believe that rising prices in the United States have worsened their financial situation. 65% of American adults believe that their financial situation is worse than that in 2022 due to rising prices, and 19% of them believe that their financial situation is "seriously deteriorating".

Analysts pointed out that although the problem of high inflation in the United States improved in the second half of 2023, the prices of energy, food and other commodities closely related to people's livelihood continued to rise, making life more difficult for ordinary Americans.

There are recent signs that consumer demand may decline. In recent weeks, companies such as McDonald's and Pepsi Cola have said that American consumers are facing pressure due to stubborn food inflation and rising costs of dining out, renting houses and mortgages.

High interest rates pressure the real estate market

High mortgage interest rates and rising house prices continued to restrain the market performance in the spring housing purchase season in May.

According to the data released by the National Association of Realtors on the 22nd, the sales of second-hand houses in the United States fell 1.9% in April, and the seasonally adjusted annual sales volume was 4.14 million units, lower than market expectations, while the revised data in March was 4.22 million units. Sales across the country are declining, with a decline of 4% in the northeast, 2.6% in the west, 1.6% in the south, and 1% in the central and western regions.

The average price of second-hand houses rose by 5.7% to $407600, the tenth consecutive rise, and also set a new record in April.

Lawrence Yin, chief economist of the National Association of Realtors, said the decline in sales was "somewhat depressing". Economists had expected sales to reach 4.2 million units.

The 30-year fixed loan interest rate in the United States has risen in five of the past six weeks, and is now as high as 7.02%, up from 6.39% a year ago. Potential buyers are frustrated by the high price, which is partly due to the tight housing inventory.

The data also showed that the supply of second-hand housing in the United States in April increased by 9% from March to 1.2 million units, the fourth consecutive increase, but still at a low level. The data before the epidemic was 1.7 million units. Homeowners are hesitant to put their houses on the market, partly because they do not want to give up the low mortgage interest rate they currently enjoy. If they buy a new house, they will have to face higher interest rates.

Sales of high-end second-hand housing market in the United States were more active in May. Houses priced at $1 million or more are up 40% from a year ago, partly because their inventories have surged 34%. One third of sales came from first-time buyers, the highest share since January 2021, but still below historical levels.

The analysis points out that if the Federal Reserve delays the interest rate cut, the pressure on the real estate market may continue.

"Usually at this time of the year, we will see a sharp increase in housing sales, but mortgage interest rates continue to inhibit housing listing and purchase," said Robert Fricker, an economist with the US Navy Federal Credit Union. Prices continue to rise, and low-income and even middle-income Americans further lose the opportunity to buy houses. The only real way to alleviate this situation will be for the Federal Reserve to cut interest rates later this year, which will eventually affect mortgage rates. (Reporter Wang Jing)