Federal Reserve officials regarded the U.S. economy’s outlook as particularly uncertain last month, according to minutes released Wednesday, and said they would “proceed carefully.”
The U.S. labor market remains strong despite higher interest rates—perhaps too strong for the inflation fighters at the Federal Reserve.
The Federal Reserve signaled one more hike was possible this year, as central bankers shift their focus toward how long they’ll keep rates high and when they’ll decide there has been enough progress on their inflation fight.
Further clues about the future path of the Fed’s interest rate policy could emerge at a news conference Wednesday after the central bank issues a policy statement and its quarterly economic projections.
Gas costs drove inflation in August, rising 10.6 percent over the month and accounting for more than half of the increase over July. All other major energy categories rose as well.
The latest data follows other recent reports that suggest the economy and the job market may be slowing enough to cool inflation pressures.
Rising trade barriers, aging populations and broad transition to renewable energy are trends that could make it harder for the Federal Reserve and other central banks to meet their inflation targets.
Rates have risen for the pst four weeks, grim news for would-be homebuyers already challenged by a housing market that remains competitive due to a dearth of homes for sale.
Most Federal Reserve officials last month still regarded high inflation as an ongoing problem that could require further interest rate increases, according to the minutes of their July 25-26 meeting released Wednesday.
Inflation in the United States edged up in July after 12 straight months of declines. But excluding volatile food and energy costs, so-called core inflation matched the smallest monthly rise in nearly two years.
Thursday’s inflation data will be among the key metrics the Federal Reserve will consider in deciding whether to continue raising interest rates.
In raising the benchmark short-term interest rate to its highest level since 2001, the Fed provided little guidance about when—or whether—it might hike rates again.
The Federal Reserve’s increase would be its 11th hike in 17 months. As with its previous rate hikes, this one would likely further elevate the costs of mortgages, auto loans, credit cards and business borrowing.
A study by the New York Federal Reserve has found that 14% of applicants for auto loans were rejected over the past year—the highest such proportion since the New York Fed began tracking the figure in 2013.
The expected decline in overall inflation over the past 12 months would bring the figure much closer to the Fed’s 2% target and reflect the progress the central bank has made in slowing price acceleration.
Last month’s progress in easing overall inflation was tempered by an elevated reading of “core” prices, a category that excludes volatile food and energy costs.
Speaking on Capitol Hill for a second day, Federal Reserve Chair Jerome Powell said returning U.S. inflation to 2% is crucial to support the long-term health of the U.S. economy.
The contrast between the Fed’s stated concern over still-high inflation and its decision to skip a rate hike has heightened uncertainty about its next moves.
The two days of hearings before Congress will likely focus on the question that consumed the central bank last week: How far and how fast will the Fed raise its key interest rate from here?
Chair Jerome Powell offered a nuanced view Wednesday of how the Federal Reserve intends to address its core challenge at a time when inflation is both way below its peak but still well above the central bank’s 2% target.
