US Fed hopeful of achieving 2% inflation target soon

New Delhi: The U.S. Fed, in its latest meeting, noted a lack of significant progress towards reaching the 2 per cent inflation target, although it added that there had been modest improvements in recent months, as highlighted in the Fed policy minutes.

"The early part of this year had seen a lack of further progress toward the Committee's 2 per cent objective. Participants judged that although inflation remained elevated, there had been modest further progress toward the 2 per cent goal in recent months," said the Fed minutes released on Wednesday.

The Committee also emphasized a data-dependent approach to monetary policy, with decisions conditional on economic evolution rather than a preset path. It noted that expectations regarding balance sheet policy indicated a median expected timing for the end of the balance sheet runoff in April 2025.

Regarding the future outlook, the members agreed to continue monitoring incoming information for economic implications and adjust the monetary policy stance as needed to achieve the goal of 2 per cent inflation.

The Fed meeting also stated that financial conditions eased modestly, driven by higher equity prices and a consensus that the federal funds rate had reached its peak.

The meeting also highlighted that labour market conditions remained solid. Job gains continued to be strong, while the unemployment rate had edged up but was still low. On consumer price inflation, the Fed said it was running well below where it was a year earlier, but further progress toward the 2 percent inflation objective had been modest in recent months.

The Fed also mentioned that in April, real imports of goods in the U.S. experienced a notable increase, driven by higher imports of autos and capital goods. This surge in imports contributed to a widening of the nominal U.S. international trade deficit for the month, as imports of goods and services outpaced exports.

"Real exports of goods edged up in April relative to March, following tepid growth in the first quarter. Real imports of goods jumped in April, driven by higher imports of autos and capital goods," said the Fed minutes.

Additionally, the data highlighted that foreign GDP growth, particularly in emerging market economies like China, was supported by robust external demand. However, recent Chinese data indicated a significant slowdown in economic activity in the second quarter, notably marked by a sharp decline in lending to households and businesses.

The next meeting of the Fed Committee will be held on Tuesday-Wednesday, July 30-31, 2024.