WASHINGTON—While market analysts and economists, including within credit unions, continue to forecast rate cuts in 2024, the newly released minutes from the Federal Reserve’s January meeting make clear there are concerns over moving too soon.
Fed officials indicated their concerns that a premature rate reduction could allow inflation to again pick up its pace, which they see as a greater risk than holding rates too high for too long.
“Most participants noted the risks of moving too quickly to ease the stance of policy,” the minutes from the Jan. 30-31 meeting state.
As CUToday.info has regularly reported, a two-year campaign of raising rates to fight inflation has pushed the Fed funds rate to a range between 5.25% and 5.5%, which is approaching a near quarter-century high.
What Chairman is Saying
As also reported, Federal Reserve Chairman Jerome Powell stated following the January meeting that it’s highly unlikely any rate cut will be made when the Fed committee next meets on March 19-20.
Some credit union economists have predicted a rate reduction will occur in May, while others don’t see any such rate cuts until the second half of the year.
The most recent federal data show job growth remains remarkably strong, while the pace of inflation has not slowed to the degree many had expected.
No Increases Likely
The newly released minutes show some members of the Federal Open Market Committee believe inflation has been pushed up by some one-off events, committee members nevertheless “…viewed that there had been significant progress recently on inflation returning to the committee’s longer-run goal.”
It appears the Fed has ruled out any increase however, saying FOMC members “judged that the policy rate was likely at its peak for this tightening cycle.”
The full Fed minutes can be viewed here.