US Economy
Federal Reserve minutes published on Wednesday indicate that a majority of policymakers anticipate another interest rate increase before the end of the year, as the central bank continues its battle against persistent inflation goal for more than half a decade.
“With regard to the outlook for monetary policy beyond the current meeting, most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end,” said minutes of the meeting, released after a routine three-week lag.
Several participants said they viewed the previous policy rate as not being adequately restrictive of economic activity.
The Fed operates under a dual mandate to maintain its inflation target while simultaneously fostering maximum employment.
The US unemployment rate has remained relatively stable over the past year, even as job growth has fluctuated. This stability is largely attributed to demographic shifts and reduced immigration levels.
“Almost all participants assessed that, while inflation risks were tilted to the upside, risks to the labour market had diminished and were now broadly balanced,” the Fed’s meeting minutes said.
The Personal Consumption Expenditures (PCE) price index — the Fed’s preferred metric for tracking inflation — reached a high of 7.2% in June 2022 before it began to decline.
It hit a low of 2.2% in September 2024 before beginning to increase again, partially driven by US President Donald Trump’s unpredictable economic policies, including the widespread imposition of tariffs on US imports.
Trump’s war on Iran has pushed prices up even further since February, with energy costs skyrocketing due to Tehran’s retaliatory action.
PCE inflation reached a three-year high of 3.8% in May, before cooling slightly to 3.4% by August, which is the most recent month for which data is available.
Meeting participants observed that there has been insufficient progress in curbing inflation over the last few months.
“They noted that ongoing geopolitical developments, which had pushed up prices for crude oil and refined fuel products, and surging AI-related <a the minutes said.
Participants expressed concern that the longer energy prices remain at elevated levels — as they currently are — “the greater the risk that cost increases in certain sectors could lead to broader price pressures”.
