Fed minutes: they alert by risks in increasing inflation and unemployment

Those responsible for the Federal Reserve They recognized in May that in the coming months they could face “Difficult balances” In the form of an increase in inflation and unemployment, a perspective reinforced by the projections of a higher risk of recession, according to the minutes published on Wednesday.

The combination of increased inflation and unemployment would force those responsible for the US Central Bank to decide whether to prioritize the fight against inflation with A more restrictive monetary policy or cut interest rates to support growth and employment.

“Almost all participants commented on the risk that inflation turns out to be more persistent than expected,”as the economy adapts to the largest import taxes proposed by the government of President Donald Trump.

“Participants pointed out that the Committee (Open Market Federal) could face difficult balances If inflation turns out to be more persistent while the prospects for growth and employment weaken, “the minutes said.

“The participants agreed that the uncertainty On economic perspectives it had increased even more, so it was appropriate to adopt a cautious approach until the net economic effects of the series of changes in government policies are clearer. “

What are the future perspectives

The prospects for increasing unemployment and of inflation They were outlined in the personnel reports, which foreseen an “remarkably” higher inflation rate this year due to the impact of tariffs.

Also a labor market “What is expected to weaken substantially”with an unemployment rate that will exceed the long -term estimates of full employment at the end of this year and will remain in that figure for two years.

The results of the meeting of May 6 and 7 and the most detailed account of the same reflected in the minutes since then were over by Trump’s decision of delay the most aggressive tariffs, in particular the 145% tax at Chinese imports that threatened to paralyze a large part of world trade.

The change caused many analysts to reduce the Risks of recession that Fed personnel in early May had considered “almost as probable as the baseline” of deceleration but continuous growth.

But, in theory, Those tariffs are only suspended until Julywaiting for negotiations on definitive tax rates that have kept Fed officials and entrepreneurs in the dark about the economic landscape they can face in the coming months.

The uncertainty which is still perceived today was also the slogan at the meeting of early May, when The Fed decided to maintain the stable reference interest rate in the fork of 4.25% to 4.5%.

The next meeting of the Fed will take place on June 17 and 18when the Central Bank will announce the new projections of its monetary policy responsible on the perspectives of inflation, employment and growth for the coming months and years, as well as the interest rate they consider appropriate.