Fears of worse inflation remain
U.S. Federal Reserve officials have become slightly more positive about economic prospects in the United States despite a more pronounced drag from housing, according to the minutes of the Fed’s most recent policy-setting meeting.

Core inflation, meanwhile, remained “uncomfortably high,” according to the minutes, and officials were unconvinced that inflation is on a firm downward trend.

Though officials “continued to view the risks to economic activity as weighted to the downside these downside risks were judged to have diminished slightly,” according to the minutes of the Federal Open Market Committee’s May 9 meeting released today.

The FOMC kept interest rates unchanged at 5.25% at that meeting for a seventh straight time dating back to last summer and made minimal changes to its accompanying statement, suggesting officials are happy with rates where they are.

“Recent developments were seen as supporting the Committee’s view that maintaining the current target rate was likely to foster moderate economic growth and a gradual ebbing in core inflation,” the minutes stated, adding that the outlook for growth and inflation “had not changed materially” between the March and May FOMC meetings.

The minutes also suggested that officials think the economy is in better shape than recent subpar GDP numbers indicate. “Participants noted that the more-rapid gains in estimates of gross domestic income (over the past year) might better capture the pace of activity than the modest advances in measured GDP,” the minutes stated.