FOMC Minutes Reveal Split Views & Concerns Over Inflation

The Federal Reserve recently released the minutes of the Federal Open Market Committee (FOMC) meeting held on May 2-3 2023, shedding light on the central bank’s stance on monetary policy. Certain key points from the minutes paint an interesting picture for the US economy and the broader financial markets.

Officials Split On Interest Rate Hikes

According to the minutes, officials expressed divergent opinions on the need for further interest rate hikes. The economic forecast presented by the staff to the FOMC was indicative of the fact that tightening in bank credit conditions, along with existing financial constraints, would likely result in a mild recession followed by a moderate recovery later in the year.

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In line with expectations, the Federal Reserve raised key interest rates by 25 basis points to a range of 5.00% to 5.25% in May. Interestingly, participants in the meeting agreed on the soundness and resilience of the U.S. banking system. They did also express concerns that tighter credit conditions for households and businesses could dampen economic activity, hiring, and markets. However, the extent of these effects remained uncertain, according to the minutes.

Concerns Over Growing Inflation

A number of participants expressed the belief that the progress made in bringing inflation back to the target rate of 2% could be disappointingly slow. They suggested that additional policy measures may be necessary in future meetings. However, others noted that if the economy continued to evolve as expected, further tightening after the current meeting might not be required.

Furthermore, many officials emphasized the importance of raising the debt limit in a timely manner to avoid potential disruptions in the financial system and the broader economy. In conclusion, the minutes revealed a unanimous agreement among participants that inflation remained at an inappropriately high level and with the labor market remaining tight, “upside risks to the inflation outlook remained a key factor shaping the policy decisions”.

In the wake of this news, the price of Bitcoin witnessed a marginal decline of 0.15% while Ethereum on the other hand exhibited a similar loss of 0.18%. At the time of writing, Bitcoin was exchanging hands at $26,247.55 with the larger crypto market standing at $1.10 Trillion, which represents a decrease of 2% over the past day.

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