May FOMC meeting minutes show Fed's patience on rate changes

The FOMC's meeting minutes from May explain why the Federal Reserve is keeping interest rates steady.

Federal Reserve building after May FOMC minutes Source: Bloomberg

The US Federal Reserve is not eager to take any action to cut or raise interest rates. That was the major message from the recently released May Federal Open Market Committee (FOMC) meeting minutes.

Why is the Fed being patient about interest rates?

The Federal Reserve officials voted in April to leave interest rates in the range of 2.25-2.5%. The meeting minutes explained that the Fed exercised patience about interest rates because of a slight improvement in the US economy.

‘Members observed that a patient approach to determining future adjustments to the target range for the federal funds rate would likely remain appropriate for some time, especially in an environment of moderate economic growth,' noted the minutes.

The FOMC minutes also showed that while there is optimism about the US economy, some Fed officials voted against interest rate hikes because of concern about global economic concerns and low inflation.

‘Other sources of uncertainty remained. In light of global economic and financial developments as well as muted inflation pressures,' there would be a pause in interest rate increases, according to the meeting minutes.

Will the Fed cut interest rates in the future?

While US President, Donald Trump, wants the Fed to lower interest rates, the May FOMC meeting minutes show that is unlikely to happen soon. Mark Hamrick, an economic analyst, said that investors shouldn’t expect the Fed to listen to Trump.

‘While some investors are betting that the Federal Reserve will be cutting rates by the end of this year, there’s not a lot in the minutes to support that case,' said Hamrick.


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