Deniz 
At their most recent meeting, Federal Reserve officials expressed growing anxiety about inflation, saying they were not confident enough to proceed with interest rate cuts.
Minutes from the Federal Open Market Committee’s (FOMC) policy meeting on April 30–May 1 that were made public on Wednesday showed that officials were unsure on when to loosen.
A series of readings that revealed inflation was more recalcitrant than authorities had anticipated at the beginning of 2024 preceded the conference. The Fed wants inflation to be at 2%, yet every metric indicated that price rises were far faster than that.
“Participants observed that while inflation had eased over the past year, in recent months there had been a lack of further progress toward the Committee’s 2 percent target,” the report stated. “The recent monthly data revealed notable increases in components of the inflation of prices for goods and services.”
The minutes also revealed that “many participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.”
At the meeting, the FOMC decided unanimously to maintain its benchmark short-term borrowing rate at 5.25%–5.5%, a 23-year high that it has held since July 2023.
“Participants assessed that maintaining the current target range for the federal funds rate at this meeting was supported by intermeeting data indicating continued solid economic growth,” the minutes stated.
Since then, there have been some little indications of improvement in terms of inflation; the consumer price index for April indicated that inflation was maintaining a 3.4% annual rate, which was somewhat lower than in March. Food and energy excluded, the core CPI was 3.6%, the lowest since April 2021.
Consumer polls, however, show that concerns are rising. In the University of Michigan consumer mood poll, for example, the one-year forecast was at 3.5%, the most since November, while general optimism fell. Similar findings were found in a New York Fed poll.
Inflation Concerns and Economic Growth
Fed representatives at the meeting pointed out the pressure inflation was putting on consumers, especially those at the lowest end of the pay scale, and various upside risks to inflation, especially from geopolitical developments. While some participants contended that seasonal distortions could have caused the early year inflation spike, others countered that the moves should not be “overly discounted” because they were “broad-based.”
Related: US Inflation Holds Steady: April Figures Released
Consumer Pressures and Riskier Borrowing
Members of the committee also voiced concern that as inflationary pressures continue, consumers were turning to riskier kinds of borrowing to make ends meet.
“Many participants noted signs that the finances of low- and moderate-income households were increasingly coming under pressure, which these participants saw as a downside risk to the outlook for consumption,” the minutes stated. They mentioned rising credit card and buy-now-pay-later usage as well as rising consumer loan default rates.
Despite some predicted pullback this year, officials were generally upbeat about growth forecasts. In the end, they added, they expect inflation to revert to the 2% target, but they became unsure about how long that would take and how much of an effect high rates are having.
Several times, immigration was cited as a factor supporting both the job economy and maintaining consumption levels.
What is Federal Open Market Committee (FOMC)?
Directing open market operations (OMOs), the Federal Open Market Committee (FOMC) is the division of the Federal Reserve System (FRS) that sets the course of monetary policy in the United States. Comprising seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven Reserve Bank presidents who rotate in their roles, the committee has twelve members.
The Board of Governors chair is concurrently the FOMC chair. The following individuals are now members of the board:
On May 23, 2022, Jerome Powell was sworn in for a second four-year term as chair. He took up this post for the first time in February 2018. Powell is thought of as moderate.
John Williams is the FOMC vice chairman. 2018 saw him appointed President of the Federal Reserve Bank of New York.
Joining the Federal Reserve Board are Michelle Bowman, Michael Barr, Lisa Cook, Philip Jefferson, and Christopher Waller.