The U.S. Federal Reserve expressed optimism about reaching its 2% inflation target, despite acknowledging limited progress so far this year. The recent Fed policy minutes revealed that there have been some modest improvements in recent months.

The minutes, released on Wednesday, stated, "The early part of this year had seen a lack of further progress toward the Committee's 2 percent objective. Participants judged that although inflation remained elevated, there had been modest further progress toward the 2 percent goal in recent months."

The Committee emphasized a data-driven approach to monetary policy, making decisions based on the economic situation rather than following a predetermined path. It was noted that the median expectation for ending the balance sheet runoff is April 2025.

Looking ahead, the members agreed to keep monitoring economic data and adjust the monetary policy as needed to achieve the 2% inflation goal. They observed that financial conditions had eased slightly, influenced by higher equity prices and the belief that the federal funds rate had peaked.

The Fed meeting also noted that the labor market remained strong, with consistent job gains. Although the unemployment rate had slightly increased, it remained low. On consumer price inflation, the Fed reported that it was significantly lower than a year ago, but recent progress towards the 2% target had been modest.

In April, real imports of goods in the U.S. saw a notable rise, driven by higher imports of autos and capital goods, which contributed to a wider nominal U.S. international trade deficit. "Real exports of goods edged up in April relative to March, following tepid growth in the first quarter. Real imports of goods jumped in April, driven by higher imports of autos and capital goods," the Fed minutes noted.

The data also indicated that foreign GDP growth, especially in emerging markets like China, was supported by strong external demand. However, recent Chinese data showed a significant slowdown in economic activity in the second quarter, marked by a sharp decline in lending to households and businesses.

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