## Federal Reserve Notes Easing Inflation, Cooling Economy## Federal Reserve Notes Easing Inflation, Cooling Economy WASHINGTON (AP) – Federal Reserve officials, during their latest meeting, expressed optimism about recent signs of easing inflation. The minutes released from their June 11-12 meeting revealed that policymakers observed several factors that could lead to a further decline in inflation in the coming months. ### Factors Contributing to Easing Inflation * Slower wage growth: Reduced pressure on companies to increase prices due to lower labor costs * Price discounts: Retail chains and other businesses offering discounts, reflecting customer resistance to higher prices ### Labor Market Concerns In a notable shift, policymakers expressed concerns about potential layoffs if the labor market cools further. While the demand for workers has slowed, it has primarily manifested as fewer job openings. ### Balancing Goals The minutes indicate that the Fed is considering both its policy goals: stable prices and full employment. This shift differs from the previous focus on solely taming inflation while maintaining a strong labor market. ### Interest Rate Expectations Financial markets eagerly anticipate further clarity on the Fed’s interest rate cut timeline. While the initial forecast suggested three cuts this year, it was revised to just one in a statement issued after the June meeting. However, Chairman Jerome Powell later indicated that one or two cuts were equally likely. ### Recent Developments Powell’s comments at a monetary policy conference in Portugal on Tuesday encouraged financial markets. He acknowledged the progress made in bringing inflation back to the target of 2% and noted the decline in consumer price increases in April and May. ### Outlook The Federal Reserve will continue to monitor economic data and adjust its policies accordingly. While easing inflation is a welcome sign, the potential for layoffs in a cooling labor market could influence the Fed’s decision-making process.
FILE – A news conference with Federal Reserve Chairman Jerome Powell appears on a monitor on the floor of the New York Stock Exchange in New York, May 1, 2024. The Federal Reserve releases minutes from its most recent meeting to discuss interest rate policy on Wednesday, July 3, 2024. (AP Photo/Seth Wenig, File)
WASHINGTON (AP) — Federal Reserve officials at their latest meeting welcomed recent signs that inflation is easing and highlighted data suggesting the labor market and broader economy may be cooling.
If both trends continue, it could lead to the Fed cutting its key interest rate in the coming months, from a 23-year high.
Minutes from the Fed’s June 11-12 meeting, released Wednesday, showed that policymakers saw several factors that could further reduce inflation in the months ahead. Those factors include slower wage growth, which reduces pressure on companies to raise prices to cover their labor costs.
Policymakers also pointed to anecdotal cases of retail chains and other businesses lowering prices and offering discounts, a sign that customers are increasingly resisting higher prices.
And in a notable shift from earlier minutes, officials cited concerns that a further cooling of the labor market would likely lead to layoffs. So far, the slowing demand for workers has been seen mainly in the form of fewer job openings.
Concerns about a potential increase in layoffs suggest the Fed should consider both policy goals: stable prices and full employment. That’s a shift from the previous two years, when the Fed focused solely on taming inflation, which hit a four-decade high of 9.1% in 2022, while keeping the labor market strong.
The minutes of Fed meetings sometimes provide important details about policymakers’ thinking, particularly about how their views on interest rates might evolve. Financial markets are eagerly awaiting more clarity on the likely timetable for the Fed to begin cutting its benchmark interest rate. Fed rate cuts would likely lower borrowing costs on mortgages, auto loans and credit cards, as well as business loans, and could also boost stock prices.
After their June 11-12 meeting, Fed officials issued a statement saying that inflation had eased back toward their 2% target. But they also scaled back their expectations for rate cuts this year, from three cuts to just one.
However, at a press conference, Chairman Jerome Powell downplayed the forecast for a single cut, saying one or two cuts were equally likely. Four of the 19 policymakers said they did not foresee any rate cuts this year. The remaining 15 officials were almost evenly split between one and two cuts.
Financial markets were encouraged on Tuesday by Powell’s comments at a monetary policy conference in Portugal. Powell said the Fed had made “a lot of progress” in bringing inflation back to 2%.
He noted that consumer prices rose at a sustained high rate in the first three months of the year, but that inflation fell steadily again in April and especially May, as it had already started to do in the second half of 2023.
Christopher Rugaber, The Associated Press
