The minutes of the Federal Reserve meeting were "released": officials hinted that they would consider raising interest rates if necessary

In the early morning of Thursday Beijing time, the Federal Reserve released the minutes of the Federal Open Market Committee (FOMC) policy meeting in April.

The minutes show that the Federal Reserve is disappointed with the recent inflation data and is willing to consider raising interest rates again if there is no further cooling. Affected by this, the three major stock indexes of the United States plunged in the short term, the yield of medium - and long-term U.S. debt stabilized and recovered, and the dollar index again approached the 105 threshold.

The Federal Reserve expresses concern about inflation

According to the latest meeting minutes, the participants expected that the inflation rate would recover to 2% in the medium term, but the anti inflation process might take longer than previously thought. "Participants observed that although inflation has eased over the past year, there has been a lack of further progress in achieving the Commission's 2 per cent target in recent months. The components of commodity and service price inflation have increased significantly."

Monetary policy is still regarded as restrictive, but many participants commented on the uncertainty of its restrictive degree. "This uncertainty stems from the fact that high interest rates may have less impact than in the past, or the so-called neutral interest rates may be higher than previously thought," the minutes said.

It should be noted that there are discussions within the Committee on possible further interest rate hikes. "Many participants mentioned that they are willing to further tighten policies if inflation risks appear in an appropriate way.".

The Federal Reserve raised several upward risks of inflation, especially geopolitical events, which will bring pressure on consumers. Some participants said that the rise in inflation at the beginning of the year may be due to seasonal distortions, but others believed that the risks should not be excessively underestimated. "Many participants noted that there are signs that the financial situation of low - and middle-income families is increasingly facing pressure, which is a downside risk to the consumption prospect. They pointed out that the use of credit cards and buy before pay services has increased, and the delinquency rate of some types of consumer loans has also increased."

For the future policy outlook, participants believed that if inflation remained sticky, interest rates would remain high for a longer period of time, or interest rates would be cut in the event of unexpected weakness in the labor market. This is a stronger position than the Federal Reserve meeting in March, when officials judged that the policy interest rate might be at the peak of this tightening cycle. Almost all participants believed that if the economy developed as widely as they expected, it would be appropriate to shift the policy to a less restrictive position sometime this year.

As for the adjustment of the schedule of scale reduction, the minutes of the meeting said that almost all the participants expressed their support for the decision of the Federal Reserve to slow down the pace of securities holdings in June. Some participants suggested that they could have supported the continuation of the current rate of scale reduction, or slightly increased the redemption limit of US Treasuries. Several participants stressed that the decision to slow down the pace of the deflation will not affect the monetary policy stance. Several participants also stressed that slowing down the pace of shrinking the balance sheet does not mean that the final shrinking of the balance sheet will be less than other ways of shrinking the balance sheet. It was generally agreed that it would be important to continue monitoring reserve status indicators in the future.

The time to cut interest rates still needs to wait

Before the interest meeting, influenced by the factors of energy prices and rents, the inflation index of the United States was higher than expected for three consecutive months, which also brought great challenges to the monetary policy shift. However, after the resolution of the Federal Reserve, the market once again saw signs of price easing. At the same time, demand was weak or put pressure on the economy. The labor market was more balanced, and investors began to rekindle hopes for interest rate cuts in September.

In recent weeks, many companies, including McDonald's and Pepsi Cola, have pointed out that American consumers are facing pressure due to sticky inflation and rising costs of dining out, renting houses and mortgages.

Christina Hennington, vice president and chief growth officer of retailer Target, said in the financial report conference call on Wednesday: "We are cautious about the near-term growth prospects, and it is expected that the trend of non essential consumer goods will still face pressure in the short term.".

Bob Schwartz, senior economist of Oxford Economic Research Institute, said in an interview with China Business News that the door of the Federal Reserve to cut interest rates later this year was not closed. Of course, it depends on whether the inflation data match. Housing inflation is still a major challenge and may take longer to subside, but there are signs that it is coming.

Judging from the statements made since this month, even though the price progress has been confirmed, no official has yet talked about the formal discussion of interest rate reduction. According to the summary of First Finance, although Federal Reserve Governor Bowman and Minneapolis Fed Chairman Kashkari talked about the possibility of interest rate increase, most Fed officials tend to wait patiently and continue to pay attention to the performance of economic data. Christopher Waller, the governor of the Federal Reserve, said at the Peterson Institute for International Economics in Washington this week: "In the absence of significant weakness in the labor market, I still need to see good inflation data for a few months before I can rest assured of supporting the stance of easing monetary policy."

Federal funds rate futures show that the probability of interest rate cut in September returns to below 60% again. Boris Schlossberg, macro strategist of BK asset management, told CBI that compared with the time point of the meeting minutes, the current situation has slightly changed, but it is not enough to give the Federal Reserve confidence to take action. He believed that as the tightening policy further pressured the economy, the conditions for the monetary policy shift would gradually mature. For the Federal Reserve, cutting interest rates requires a further balance between the dual responsibilities of employment and inflation.