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Monetary Policy Report Sees Eventual Return To Supercore Disinflation

FED
  • U.S. monetary policy is well-positioned to respond to persistent inflation on one side and a weaker-than-expected labor market on the other, and the central bank is still waiting for greater confidence that inflation is moving steadily toward its 2% goal before lowering interest rates, the Federal Reserve said in a semiannual report to Congress on Friday.
  • Full report here.
  • Supercore inflation is expected to eventually see return to disinflation: "The lack of further progress this year is due in large part to price increases in volatile categories—for example, portfolio management services, which can be influenced by idiosyncratic factors, such as swings in the stock market, more than supply and demand conditions. Because labor is a significant input to these service sectors, the ongoing deceleration in labor costs—supported by softening labor demand and improvements in labor supply—suggests that disinflation will eventually resume for this category."
  • Neutral fiscal policy for now: "Federal fiscal policy actions were roughly neutral for GDP growth last year and so far this year"
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