Policymakers’ continued to have different views on the implications of recent inflation data for the pace of normalization. However, policymakers were generally hopeful that a labor market that was continuing to strengthen would eventually contribute to inflation firming toward its objective. Harker dismissed concerns about recent softness as “unwarranted” and maintained his expectation for three hikes in total this year. He cautioned that “it’s a mistake to get caught up in a single report.” Kaplan’s sentiments were similar. He argued that “for a number of I think idiosyncratic reasons, inflation dipped,” but the April PCE inflation number was “sort of back on trend.” He said that, “while inflation has been slow and uneven, I don’t think we have a deteriorating trend.” Powell also saw three hikes this year as appropriate. He observed that “Inflation has been below target for five years and has moved up only slowly toward 2 percent, which argues for continued patience, especially if that progress slows or stalls.” (We will comment on his recent remarks on the balance sheet shortly, in a separate commentary.) After the May employment report, Kaplan noted that “If we are not at full employment, we are moving much closer to it,” citing “dramatically” more skilled jobs open than workers available. Harker also argued that “we’re feeling real tightness” and “we’re essentially at normal now.”
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