At the June meeting, some Federal Reserve policymakers suggested they would have supported raising interest rates, despite the decision to leave them unchanged. According to the minutes released, several officials argued in favor of a rate increase due to stronger-than-expected economic activity and no clear signs of inflation returning to the Fed’s 2% target. Despite this, all 11 voting members of the Federal Open Market Committee agreed to maintain steady rates, given the rapid and high rate hikes in the past year. This was the first pause after 10 consecutive increases from March 2022, when rates were lifted from near zero. However, officials anticipated two more rate increases this year, as part of an effort to bring inflation down to the Fed’s target. Despite holding rates steady in June, Fed Chair Jerome Powell stated that greater economic resilience may necessitate continued rate increases. On inflation the minutes showed that:
- Inflation is viewed as unacceptably high.
- Declines in inflation have been slower than expected.
- Core goods inflation has moderated but slowed less rapidly than expected despite easing supply chain constraints.
- Some participants noted a recent moderation in housing services inflation and expected this trend to continue. However, a few pointed to upside risks in the same outlook.
Meanwhile, earlier today, US factory orders in May 2023 were softer than expected. The May 2023 numbers showed that orders increased by 0.3%, falling short of the expected 0.8% growth. This followed an upward trend, with orders rising in 5 of the past 6 months. However, there was a downward revision to April’s growth, from 0.4% to 0.3%. When excluding transportation, factory orders declined by 0.5%, a decrease from the previous month’s -0.2%, which was revised to -0.6%.
