Market participants and experts are trying to figure out the outlook for the US economy. They have not reached any consensus.
Analysts highlight vague prospects for the US economy even in the short term. Experts have spotted a variety of factors that have been taking a toll on the top global economy such as a slowdown of economic growth in China, troubles in the US commercial property market, and tough financial conditions. The FOMC policymakers underscored these headwinds in the minutes of the policy meeting held in May.
The rate-setting committee had to admit uncertain prospects of the US economy. Besides, the FOMC members agreed to keep close tabs on inflationary risks.
The Fed policymakers think that rampant inflation is still denting the purchasing power of households, especially those which have to deal with high spending on essentials like groceries, accommodation, and transport. Because of stubborn inflation, the Federal Reserve concluded that it does not make sense to begin the cycle of monetary easing until inflation is firmly on the way to the official 2% target. In May, the FOMC policymakers decided to put the funds rate on hold in the range of 5.25% to 5.5% per annum at the 6th meeting straight. The regulator has maintained the benchmark short-term rate at a 22-year high since July 2023. Back at that meeting, the committee signaled that more rate hikes were on the agenda. So, further tightening would be appropriate to achieve the utmost employment and the annual CPI at 2%.
According to the tentative forecast, the Federal Reserve could announce the first rate cut not until September 2024. Some experts reckon that the first round of monetary easing will be delayed until 2025 because the current inflation rates are still way above the target level.
