Inflation Alleviation

The Federal Reserve emphasized in its latest Congressional Monetary Policy Report that inflation has significantly eased and the rate of price increases has returned to pre crisis levels. This indicates that the economy is gradually returning to its pre pandemic normal state.

Job market recovery

The report points out that the job market continued to rebalance in the first half of this year, with weakened labor demand and increased supply, thanks to increased immigration. This situation is similar to the pre pandemic job market, although tense but not overheated. The nominal wage growth is also slowing down.

Inflation and Policy Adjustments

At present, inflation is maintained at around 2.6% based on the personal consumption expenditure (PCE) price index. Although this is still considered high, it is approaching a reasonable level. If price pressure continues to ease, the Federal Reserve may start its interest rate cut plan as early as September. However, the Federal Reserve emphasizes that any monetary policy decision will be based on economic conditions rather than political considerations.

Future policy direction

The Federal Reserve maintained interest rates at 5.25% to 5.50% at its policy meeting in June. However, the financial market expects to cut interest rates twice by the end of the year, each time by 25 basis points. Some Democratic lawmakers have criticized the affordability of low-income families for high interest rates, while Republicans have accused the Federal Reserve of slow response to inflation.