Fed report highlights inflation and growth

The June issue of the semi-annual Monetary Policy Report, prepared biannually by the Fed for the US Congress, has been published.

Fed Chairman Jerome Powell’s report to Congress next week reiterated that inflation remains well above the 2% target, despite some easing since the middle of last year.

“Bringing inflation back to 2 percent is likely to slow the trend of growth,” the report said. under It will require some softening in labor market conditions.”

High inflation warning in the service sector

In the report, it was stated that inflation in the housing sector, which is among the core services, has started to loosen in recent months, and this is consistent with the slowdown in rent increases since the second half of last year.

In the report, it was noted that inflation for other core services continued to be high and did not show any signs of relaxation, and it was noted that the expectations for a slowdown in inflation may be partly due to the further relaxation of tight labor market conditions.

Reminding that the economic activity in the country lost momentum last year after a strong recovery from the epidemic-induced recession in 2021, the report said that growth was moderate in the first quarter of this year while financial conditions continued to tighten.

“Continuing pressures in the banking sector may put pressure on credit conditions”

The report noted that financial conditions have tightened even more since January, with business loan quality remaining strong while some indicators of future operating defaults have risen slightly.

Despite concerns about profitability in some banks, the banking system remains robust and resilient, the report said. It was emphasized that he left.

“However, ongoing pressures in the banking sector may put pressure on credit conditions in the coming period and increase uncertainty about the economic outlook,” the report said. expression was used.

The outlook for the future path of the interest rate is subject to uncertainty

Reminding that the bank kept increasing the interest rate to the range of 5-5.25 percent, it was noted in the report that the outlook for the future path of the interest rate is subject to considerable uncertainty, as is the case with real activity and inflation.

In the report, which also touched on international developments, it was stated that the headline inflation abroad continued to decline due to the decline in retail energy prices, while energy inflation remained moderate in many foreign economies, while both food and core inflation remained high.

In the report, it was stated that since January, some major foreign central banks continued to tighten their monetary policies and expressed their concerns about high inflation and tight labor markets, while some central banks emphasized that they should be cautious in their approach due to delays in monetary policy and uncertainty regarding growth and inflation outlook. be told