Inflation concerns prevailed in Kevin Warsh's first FOMC meeting: Fed minutes
Washington DC, July 9
The US Federal Reserve meeting on June 16-17 weighed concerns around rising inflation as the lingering impact of tariffs, the closure of the Strait of Hormuz, and the impact of AI buildout raised upside risks.
The meeting was chaired by the newly appointed Fed Chairman Kevin Warsh.
The committee unanimously decided to hold the rates steady at 3.5-3.75 per cent, noting the need to fight persistently high inflation and bring it down to the Fed's comfort level of 2 per cent.
"Participants judged that the risks to the inflation outlook were still tilted to the upside. Many participants noted that elevated commodity prices and supply disruptions could persist longer than currently anticipated," the minutes of the FOMC meeting stated.
The committee observed that the economic growth for the second quarter is likely to be solid based on incoming data and that the jobs market has remained stable.
"Real consumer spending had been solid, and the AI buildout continued to boost real investment spending on data centres, high-tech equipment, and software. Data for April showed continued strength in both imports and exports of high-tech goods and a jump in energy exports," the minutes mentioned.
Inflation forecasts for this year and the next have been pegged higher than the one prepared for the April meeting, primarily on account of higher energy prices and the impact of the AI buildout on consumer prices.
However, total inflation was projected to slow over the latter half of this year due to a likely fall in pump prices of gasoline. Core inflation is likely to stay at the same levels for the rest of the year, participants noted.
The participants expect inflation to start trending down from next year and reach the target level of 2 per cent by 2028.
— ANI
Reader Comments
Honestly, holding rates at 3.5-3.75% feels like a band-aid on a bullet wound. Commodity prices are soaring, and supply chains are still a mess. As someone who tracks global trade, this 'persistent inflation' language is worrisome for emerging markets like India.
The AI buildout driving investment but also pushing up consumer prices is a classic double-edged sword. In India, we're seeing similar tech investments. Warsh seems like a steady hand, but I worry about the impact on global growth. Job market stability is good news though.
As a professional in international business, this meeting's focus on tariffs and energy prices makes sense. But 2028 for 2% inflation? That's a long wait. The RBI often has to react faster. Hope Warsh's deep understanding of markets translates into timely action, not just cautious optimism. 🙏
Tariffs and AI inflation? This reads like a perfect storm. I can see why they're holding steady. But the 2028 target seems overly optimistic—commodity volatility and geopolitical risks are too unpredictable. Reminds me of the chaos in global supply chains for Indian textiles.
The 'solid second-quarter growth' and stable jobs market are positive signs, but the higher inflation forecasts worry me. Especially with energy prices tied to the Hormuz closure—something we Indians felt acutely during past oil shocks. Let's see if their projections hold. 😅
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