April Overview Fed minutes relating to the March meeting showed that although nearly all participants felt it might be appropriate to reduce the Fed Funds rate later this year, they still needed to be convinced that inflation was “sustainably” on its way towards 2% before acting. Noting that improving supply conditions were a positive, while appreciating that the path to lower inflation would be “uneven,” participants acknowledged the continuation of strong economic data, and saw “disappointing readings” on inflation as a hurdle to clear before they had enough confidence to reduce their current policy stance. Indeed, by keeping its benchmark rate unchanged for the 6th time at the most recent meeting while citing the “lack of further progress” in bringing inflation to its target, the Fed further cemented its wait-and-see posture. In the post-meeting press conference, against the backdrop of stalled progress on inflation, Fed Chair Powell stated that they are willing to hold the current range “for as long as appropriate” as achieving “greater confidence will take longer than expected.” Understandably and accordingly, market expectations for the initial rate cut moved further back in the year while Treasury yields rose.
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