The Federal Reserve Meeting minutes from the beginning of May were released. What can we glean from them?

They concluded that inflation is taking longer to decrease than expected, delaying any potential reduction in their key interest rate, which is at a 23-year high. The minutes from the meeting revealed uncertainty about whether current rate policies are sufficiently restrictive to curb inflation. Factors such as homeowners and businesses locking in low rates during the pandemic have diminished the impact of recent rate hikes.

Speculation has arisen that the Fed might consider raising rates if inflation accelerates again, although Fed Chair Jerome Powell indicated after the meeting that further rate increases were unlikely, a statement that temporarily boosted markets. Recent data showing slowed hiring and cooled inflation in April further reduced the likelihood of a rate hike. Fed officials stated they would need more consistent progress toward their 2% inflation target before cutting rates. Despite earlier expectations for inflation to cool, recent data have led to lower confidence in achieving that goal. As of now, no rate cuts are expected until at least September.

When I do some analysis on the Consumer Price Index, its corroborating what Chair Jerome Powell is postulating. Indeed, the rate of change for CPI has been declining in year over year basis starting December of 2022. My cycle analysis tells me that we are still in a declining growth rate in inflation. The trend-line on the chart below is projected out 12 months. Which tells me that we should continue to experience downward pressure on inflation over the next 12 months. So it would seem that we are on the right trajectory.

Support for this is evidenced by Target lowering pricing on 5,000 products and McDonalds recent offering of a 5 dollar meal because of the pressure that their consumers are facing due to inflation.

By Amos B Robinson | www.RobinsonSalesAdvisory.com