August 22, 2024
✅️Financial Markets
Financial conditions eased modestly since last meeting, reflecting lower long-term interest rates and higher equity prices. Asset valuation pressures remained elevated, with estimates of risk premiums across key markets low compared with historical standards.
✅️Inflation
Inflation has eased over the past year but remains somewhat elevated. In recent months, there has been some further progress toward the Committee’s 2 percent inflation objective. Both total and core PCE price inflation were expected to decline further as demand and supply in product and labor markets continued to move into better balance; by 2026, total and core inflation were expected to be around 2 percent.
✅️Labor Market
Labor market conditions continued to ease: Job gains moderated, and the unemployment rate moved up further but remained low. The unemployment rate was expected to edge up slightly over the remainder of 2024 and then to remain roughly unchanged in 2025 and 2026.
✅️Housing
Residential investment was weak in the second quarter, likely reflecting the pickup in mortgage rates from earlier in the year. House prices remained elevated relative to fundamentals.
✅️Risks
Risks to the inflation forecast is tilted to the upside, albeit to a smaller degree than at the time of the previous meeting.
The risks around the forecast for real activity were viewed as skewed to the downside.
✅️Monetary Policy
All participants supported maintaining the target range for the federal funds rate at 5¼ to 5½ percent, although several observed that the recent progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range 25 basis points at this meeting.
✅️Committee Policy Actions
The Committee judges that the risks to achieving its employment and inflation goals continue to move into better balance. In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5¼ to 5½ percent.
Voting for this action: 12 members.
Voting against this action: None.
⭐️Summary:
Financial markets point to monetary policy easing in coming months. Economy is rising at solid pace, however, risks are increasing it could lose momentum if unemployment keeps advancing. Inflation has eased but remains elevated. Unemployment rose but is still low.
FOMC left rates unchanged. All 12 members voted for the decision. During discussions members admitted that incoming data was enhancing their confidence that inflation was moving toward objective and if it continues to come as expected, it would be appropriate to ease policy at the next meeting. At the same time some members pointed to progress in inflation and increase in unemployment as a reason to cut rates by 25 bp immediately. Also, some voices warned that keeping rates unchanged in the situation when disinflation was going had been by itself a tightening of the policy.