The Federal Reserve (FED) released the minutes from the May interest rate meeting: the uncertainty surrounding the economic outlook has intensified further, with the risks of rising unemployment and rising inflation increasing.

According to CCTV News, on May 28, local time, the Federal Reserve released the minutes of the Federal Open Market Committee (FOMC) meeting on May 6-7. The minutes showed that the Fed agreed to keep the target range for the federal funds rate between 4.25%-4.5%. Participants agreed that the Committee would carefully assess the follow-up data, the evolving outlook, and the balance of risks when considering the magnitude and timing of further adjustments to the target range for the federal funds rate. The committee will continue to monitor the impact of future information on the economic outlook when assessing the appropriate monetary policy stance, the minutes said. They will be prepared to adjust their monetary policy stance as appropriate if risks arise that could impede the achievement of the Committee’s objectives. Participants said their assessment would take into account a wide range of information, including labour market conditions, inflationary pressures and inflation expectations, as well as financial and international developments.

The Committee assessed that uncertainty about the economic outlook had intensified further, with higher risks of higher unemployment and higher inflation rising. Participants noted that if inflation persists while the outlook for economic growth and employment weakens, the committee may face difficult trade-offs. The final magnitude of government policy adjustments and their impact on the economy are highly uncertain. Against this backdrop, all participants agreed that it would be appropriate to maintain the target range for the federal funds rate between 4.25% and 4.5%. In considering the outlook for monetary policy, participants agreed that the Committee is well placed to wait for a clearer outlook for inflation and economic activity, given that economic growth and the labour market remain robust. Until the net economic effects of a series of government policy adjustments become clearer, caution is appropriate.

In addition, according to the report from Jin Ten, the minutes of the Federal Reserve meeting indicated that the implied benchmark policy path based on option prices (representing the mainstream market expectations) has slightly shifted downward during this period, suggesting that there may be 1 to 2 rate cuts by the end of the year (each by 25 basis points).