US Federal Reserve Discusses Inflation and Economic Outlook

The U.S. Federal Reserve, in its latest meeting, noted that while there had been modest improvements, significant progress towards the 2% inflation target was still lacking. The Fed emphasized a data-dependent approach to monetary policy, with decisions based on economic changes rather than a fixed plan. The balance sheet runoff is expected to end by April 2025.

Financial conditions have eased slightly, driven by higher equity prices and a consensus that the federal funds rate has peaked. The labor market remains strong, with continued job gains and a low unemployment rate, despite a slight increase.

Consumer price inflation is lower than a year ago, but recent progress towards the 2% goal has been modest. In April, real imports of goods in the U.S. increased, particularly autos and capital goods, leading to a wider trade deficit as imports outpaced exports. Real exports of goods also edged up in April.

Foreign GDP growth, especially in emerging markets like China, was supported by strong external demand. However, recent data from China indicated a significant slowdown in economic activity, marked by a sharp decline in lending to households and businesses.

The next Fed meeting is scheduled for July 30-31, 2024.