Federal Reserve: Decision to ease this year is dependent on inflation outcomes – TDS

Federal Reseve’s (Fed) FOMC June meeting provided no major insights regarding the policy outlook. FOMC became more cautious in the wake of sustained high inflation in Q1 2024, TDS analysts note.

Fed's SEP projections are likely already stale

“The FOMC minutes from the June meeting provided no major insights regarding the policy outlook. Indeed, the report continued to paint an FOMC that was becoming increasingly more cautious in the wake of sustained high inflation in Q1 2024. This was also reflected in the policymakers' decision to reduce the number of rate cuts penciled for 2024.”

“With that said, the Fed's SEP projections are likely already stale given recent data on inflation and consumer spending. Chair Fed Powell's remarks at the ECB's Sintra meeting on Tuesday supports this view, as the Fed seems to be already acknowledging the clear progress made on inflation and the labor market since the June FOMC meeting.”

“In our view, the main takeaway from the minutes remains intact: absent a material deterioration in the labor market, the decision to ease this year remains entirely dependent on inflation outcomes.”