The U.S. Federal Reserve signaled on Wednesday that it will maintain high interest rates and does not foresee an imminent reduction. According to the minutes released for the interest rate decision of May 1, many members believe that the current monetary policy may not be restrictive enough to achieve the inflation target.

The members view the monetary policy as well-aligned but also showed willingness to tighten it further if necessary. However, interest rate cuts are expected in the financial markets later in the year.

The minutes indicate that inflation developed disappointingly in the first quarter. Therefore, it will take longer to have confidence that inflation will return to the targeted level of two percent. It was also discussed to keep interest rates higher for longer if inflation does not decrease sufficiently.

Uncertainty about the Fed's Further Actions is Currently High. Some Representatives of the Fed Have Recently Dampened Expectations for Rate Cuts. For Example, Fed Governor Christopher Waller Stated on Tuesday That "Good Inflation" Would be Needed for Several More Months Before Rate Cuts Could Be Possible. U.S. Federal Reserve Chairman Jerome Powell Also Made Similar Comments Recently. Although Inflation and Economic Data Had Provided Some Optimism in Financial Markets Last Week That the Fed Might Ease its Tight Monetary Policy Sooner, This Hope Has Been Dampened by the Latest Statements from Fed Members.

After the publication of the minutes, the euro came under some pressure against the US dollar and fell to a daily low. The yields on US government bonds remained largely unchanged, while US stocks extended their losses.