Fed Minutes: Rate Cuts Might Take Longer

The Fed’s decision-makers believe it will take longer than previously expected to be confident in hitting inflation targets. Inflation reduction is slower than anticipated. Despite restrictive monetary policy, many participants are uncertain about the extent of the restrictions. Some are concerned about the insufficient restrictive environment. The deteriorating U.S. commercial real estate market and sharply tightening financial conditions were mentioned as economic downside risks. Almost all participants supported slowing balance sheet reductions starting in June, with Treasury reduction sizes cut by more than half.

The “new Fed communications agency” noted that due to poor Q1 inflation data, Fed officials expect rate cuts to take longer, with some open to raising rates if inflation accelerates. However, April inflation data reassured them that no rate hikes are needed.