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The May FOMC Minutes

Robert Eisenbeis, Ph.D.
Tue May 28, 2024

The minutes of the May FOMC meeting emphasized five key points pertaining to inflation risk.  These are the health of the economy, housing prices, productivity, and the balance of risks as far as policy is concerned. The fifth was the negative impact that recent inflation increases had on the committee’s confidence that policy was on track and when it might be appropriate to begin cutting rates.



In general, as far as the economy is concerned, the committee saw the slowing of GDP growth in the first quarter as likely to continue, despite the continued growth in private fixed-investment. But at the same time, they emphasized that continued growth in productivity has not only supported economic growth but might also exert downward pressure on inflation. That pressure, plus the decline in housing prices, were seen as the factors that might help moderate inflation. Concern was expressed about the upside risks to inflation and continued uncertainty that policy might not be sufficiently restrictive to put downward pressure on aggregate demand and inflation. Part of the uncertainty that participants saw was due to the possibilities that higher rates may be having a smaller impact now, that the longer-run equilibrium interest rate may be higher than in the past, and that the level of potential output may be lower than estimated currently. 
As for the future path of policy, the committee continued to emphasize that rate policy would be dependent upon incoming data, how the outlook evolves, and the balance of risks. Interestingly, the minutes indicate that many participants now think the public now well understands that policy will be data-dependent and that the committee is committed to its dual mandate.


Robert Eisenbeis, Ph.D. 
Vice Chairman & Chief Monetary Economist 
Email | Bio




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