MNI BRIEF: Fed To Congress- Looking For Confidence Before Cuts

The Federal Reserve is "acutely aware" of the challenges of high inflation and is "strongly committed" to its 2% target, its latest semiannual report to Congress on Friday showed, highlighting rate cuts are on the horizon but more confidence in the inflation decline is needed.

"The Committee has indicated that it does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%," the Fed said, reiterating guidance from the January decision. "In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks." The Fed noted the risks to achieving its employment and inflation goals have been moving into better balance and the policy rate has likely peaked.

The Fed also intends to slow and then stop reductions in its securities holdings when reserve balances are somewhat above the level it judges to be consistent with ample reserves. (See: MNI INTERVIEW: Active QT Can Aid Hikes Without Market Turmoil)