The latest meeting minutes from the U.S. Federal Reserve show that central bank officials are increasingly worried about inflation.
A summary of the May 6-7 meeting of the Federal Open Market Committee shows worries that import tariffs could spark a rise in inflation and create a difficult situation for interest rate policy.
“Participants agreed that uncertainty about the economic outlook had increased further, making it appropriate to take a cautious approach until the net economic effects of the array of changes to government policies become clearer,” read the meeting minutes.
As it has done since last December, the U.S. Federal Reserve elected to hold its benchmark federal funds rate in its current target range of 4.25% to 4.50%.
While U.S. trade policy remains a concern, Fed officials noted that economic growth in America remains “solid,” and the labor market is “broadly in balance.”
“The Committee was well positioned to wait for more clarity on the outlooks for inflation and economic activity,” reads the summary.
Since the meeting in early May, central bank officials have repeated that they will wait until there’s more clarity about fiscal and trade policy before they consider lowering interest rates.
Market expectations for interest rate cuts this year have adjusted accordingly and Wall Street no longer sees the Federal Reserve lowering rates aggressively in coming months.
Futures traders now expect the Fed to next cut interest rates in September of this year. However, the current probability of a September rate cut is only 62%.
For all of this year, futures traders only expect two rate cuts, although that outlook could change if inflation rises more than expected.
