Federal Reserve is reluctant to cut interest rates, latest minutes show
- The Federal Reserve, which sets short-term interest rates, showed no likelihood to lower rates at its most recent policy meeting, according to minutes released Wednesday.
- Some Fed officials expressed concern that inflation was too low, but stopped short of calling for rate hikes.
- The Fed's overall assessment of the economy is more upbeat than it was earlier this year.
Some Federal Reserve officials were concerned that inflation is too low, but the central bank's rate-setting body showed little desire to cut interest rates at its most recent meeting.
According to minutes from the April 30-May 1 meeting, released Wednesday, Fed officials noted that economic prospects for the U.S. and global economy were improving, while inflation had fallen farther below the Fed's 2% target.
Some officials "expressed concerns that long-term inflation expectations could be below levels consistent with" the Fed's target of 2%. However, officials still believed a return of inflation to the Fed's 2% target was "the most likely outcome," according to the minutes.
"Patience persists," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note. "Most, perhaps all, FOMC members are content to leave rates on hold for some time yet."
President Donald Trump is hoping that the central bank will start cutting rates soon to supercharge growth further, complaining that rate cuts are needed to boost the economy.
"I personally think the Fed should drop rates," he told reporters last month. "They really slowed us down." He also called for the Fed to embark on a bond-buying program to lower long-term interest rates.
At its last meeting, the Fed kept its key policy rate unchanged in a range of 2.25% to 2.5%, where it has been since the Fed hiked rates for a fourth time last December. That end-of-year hike contributed to a nosedive in financial markets as investors began to worry that the central bank was in danger of sending the country into a recession.
In January, the Fed did an about-face in response to a worsening global outlook and other risks to growth and began signaling it would be "patient" in changing interest rates. While Fed officials had projected in December two more rate hikes for 2019, they now expect to hold steady for the year.
The most recent minutes indicate that, despite recent economic improvements, the Fed remains cautious and prefers to act slowly.
"Participants noted that even if global economic and financial conditions continued to improve, a patient approach would likely remain warranted, especially in an environment of continued moderate economic growth and muted inflation pressures," they read.
-- With reporting by the Associated Press