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Fed is considering raising interest rates in the US while keeping inflation under control
Fed considers keeping restrictive policy in place for longer
The minutes from the Fed meeting on 28-29 April show that some members of the U.S. central bank see room for an interest rate hike if inflation stays above 2 proc. In the statement after the meeting, they also wanted to remove language suggesting a softer stance in monetary policy.
In the minutes, the record of the discussion, it was stressed that monetary policy is not set in advance. Decisions are to be made at each successive meeting, depending on incoming data. That is an important signal for the currency market, as it changes expectations for USD/PLN and the dollar as a whole.
The Fed notes that persistently high inflation and uncertainty tied to the conflict in the Middle East could force it to keep its current stance in place for longer. However, several meeting participants said rate cuts would be justified later this year if there are clear signs of a return to disinflation, meaning a slowdown in price growth.
The minutes also show that Fed members view the U.S.-Israel war with Iran as one of the main risk factors. In their view, the conflict could upset the balance between the risk of higher inflation and the risk of weaker employment.
The central bank says higher energy prices could continue to push inflation up in the near term. At the same time, some participants believe the impact of tariffs on core inflation should ease this year. There are also concerns that higher energy prices and tariffs could entrench price pressures.
After the 28-29 April meeting, the Fed left U.S. interest rates unchanged in the 3,50-3,75 proc. range. The next Federal Reserve meeting is scheduled for 16-17 June. What matters for the market is that the dollar is weakening against a basket of currencies by 0,18 proc. to 99,13 points, while the yield on 10-year Treasuries is down 9 bps.
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