Federal Reserve concerned as inflation remains slow

Federal Reserve concerned as inflation remains slow

The US Federal Reserve is growing increasingly concerned about the low rate of inflation, warning that lagging rates may be due to longer term factors rather than short term as initially thought.

The Fed urged patience on Wednesday, with several members saying the decision to raise rates further would depend on incoming economic data. They confirmed that “all agreed that they would closely monitor and assess incoming data before making any further adjustment to the federal funds rate”.

Inflation remains some way off the Fed’s 2 percent target rate, with the Fed’s preferred gauge showing a gain of only about 1.4 percent. However, members remained confident that the target would be hit in the near future.

“Many participants continued to believe that the cyclical pressures associated with a tightening labor market or an economy operating above its potential were likely to show through to higher inflation over the medium term,” the minutes said.

“In addition, many judged that at least part of the softening in inflation this year was the result of idiosyncratic or one-time factors, and, thus, their effects were likely to fade over time.”

The Fed also drew attention to other factors affecting the US’s economic growth, including the recent hurricanes hitting the country. These may well affect growth in the short term, but they are not expected to have a significant long-term effect.

Leave a Reply