Are members of the US Federal Reserve’s policy rate setting panel open to making credit costlier in the US to tackle inflation? So it would seem from the newly released minutes of a meeting they held in late April amid signs that US inflation could stay stuck above the central bank’s 2% target.
To enable such a possibility, “many” participants supported a change in the language of the Fed’s policy statement that would remove a reference to an easing bias. In Fed parlance, ‘many’ implies a number just short of a majority, which explains why the phrasing wasn’t changed.
That said, with the West Asia war still blowing hot and cold without any sign of a conclusive end, US monetary policy may be forced to tighten by the ongoing oil shock. The Fed’s new chair Kevin Warsh will probably find the committee having turned hawkish by the time the next meeting is held in mid-June. President Donald Trump has been keen on rate cuts.
While Warsh has earlier argued that AI adoption could deliver productivity gains that make space for a lower-rate policy, it’s unclear what his post-war views are. The world’s investors and other central banks will be watching the Fed with bated breath.