Fed officials wary of rapid interest rate cuts, meeting minutes confirm


(MENAFN) According to the minutes released on Wednesday from the Federal Reserve's latest meeting, officials expressed concerns about the potential risks associated with cutting interest rates "too quickly." This cautious sentiment underscores the Federal Reserve's deliberative approach to monetary policy adjustments amid ongoing economic uncertainties and evolving market conditions.

"Most participants noted the risks of moving too quickly to ease the stance of policy and emphasized the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to 2 percent," the minutes mentioned.

During its first meeting of 2024, which concluded on January 31st, the Federal Reserve opted to maintain the federal funds rate at its current level within the target range of 5.25 percent to 5.5 percent. This range represents the highest level in 23 years.

Additionally, the Federal Open Market Committee (FOMC) signaled that the federal funds rate has reached its peak for the current tightening cycle, suggesting a pause in the trajectory of interest rate increases.

"In discussing the policy outlook, participants judged that the policy rate was likely at its peak for this tightening cycle," the minutes restated.

"They pointed to the decline in inflation seen during 2023 and to growing signs of demand and supply coming into better balance in product and labor markets as informing that view," it further mentioned.

After reaching 9.1 percent in the summer of 2022, marking the highest level in over 40 years, consumer inflation moderated to 3.1 percent in January of the current year. This deceleration follows a 3.4 percent gain observed in December.

Although the latest inflation figures reflect a slowdown, they remain above the Federal Reserve's target of 2 percent. As a result, the central bank is anticipated to postpone its first rate cut until mid-2024, aiming to gain "more confidence" that inflation is indeed slowing down to converge with its target rate.

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