‘Almost all’ US Fed officials agreed to skip June hike, minutes show

WASHINGTON - A united US Federal Reserve

agreed to hold interest rates steady

at the June meeting as a way to buy time and assess whether further rate hikes would be needed, even as the vast bulk expected they would eventually need to tighten policy further, according to meeting minutes released on Wednesday.

While “some participants” wanted to move ahead with a rate hike in June because progress in cooling inflation had been slow, “almost all participants judged it appropriate or acceptable to maintain” the federal funds rate at the existing 5 per cent to 5.25 per cent, the minutes said.

“Most of those participants observed that leaving the target range unchanged at this meeting would allow them more time to assess the economy’s progress”, towards returning inflation to 2 per cent from its current level of more than twice that.

The minutes added detail to the policy statement and economic projections issued after the June 13-14 session, when the Fed ended its 10-meeting streak of rate hikes with a decision to hold the benchmark federal funds rate steady.

While Fed staff forecasts still foresaw a “mild recession” beginning later in 2023, policymakers wrestled with data showing a continued tight job market and only modest improvements in inflation.

Officials also tried to reconcile headline numbers showing continued economic strength with evidence of possible weakness – of household employment figures that pointed to a weaker labour market than the payroll numbers indicated, or national income data that seemed weaker than the more prominent readings of gross domestic product.

The projections issued after the June meeting showed 16 of 18 officials still expected the policy interest rate would need to rise at least another quarter of a percentage point by the end of 2023.

In that context, Fed chairman Jerome Powell at a press conference after the June meeting said the decision marked a switch in strategy, with the central bank focused more on just

how much additional policy tightening might be needed

and less on maintaining a steady pace of increases.

“Stretching out into a more moderate pace is appropriate to allow you to make that judgment” over time, Mr Powell said.

Investors in contracts tied to the overnight federal funds rate feel the Fed is highly likely to raise the benchmark rate by a quarter point, to a range between 5.25 per cent and 5.5 per cent, at its July 25-26 meeting. REUTERS