<b>Live updates: Follow the latest news on </b><a href="https://www.thenationalnews.com/mena/palestine-israel/2023/11/08/live-israel-gaza-war-hamas/"><b>Israel-Gaza</b></a> US inflation is moderating, but <a href="https://www.thenationalnews.com/tags/federal-reserve" target="_blank">Federal Reserve</a> officials noted that an escalation of the Israel-Gaza war is among numerous factors that point to an uncertain economic outlook, although data shows the conflict has not majorly affected it yet. According to minutes released on Tuesday, Fed officials noted they have seen evidence that <a href="https://www.thenationalnews.com/tags/inflation/" target="_blank">inflation</a> is climbing down towards the 2 per cent target. The US central bank left <a href="https://www.thenationalnews.com/world/us-news/2023/11/01/fed-interest-rate-decision-treasury-yields/" target="_blank">interest rates</a> unchanged at 5.25 per cent to 5.50 per cent following the conclusion of its October 31-November 1 meeting. It was the second consecutive meeting in which rates were held steady. “Participants judged that the current stance of monetary policy was restrictive and was putting downwards pressure on economic activity and inflation,” the minutes read. The Fed pointed to a positive development that showed the Personal Consumption Expenditures Price Index slowed to 3.4 per cent on an annual basis. The labour market remains tight, although that is also showing signs of coming into better balance. And while the Fed was “surprised” by strong consumer spending, some participants noted that some households' financial conditions were coming under pressure from high food prices and tight credit conditions. A few participants in the meeting also noted that energy markets had calmed following the volatility they had experienced at the onset of the Israel-Gaza war. Still, the US economic outlook contains a “high degree of uncertainty”. Among the contributing factors is questions over whether the Israel-Gaza war will spill over into the region. “A potential for a broadening of the armed conflict in the Middle East was seen as presenting upside risk to inflation through its potential effect on oil prices as well as downside risk to economic activity,” the minutes read. Fed Chairman Jerome Powell said following the October meeting that he has not seen evidence that the conflict is affecting the economy. “It isn’t clear at this point that the conflict in the Middle East is … on track to have significant economic effects,” he told reporters. “That doesn’t mean it isn’t incredibly important and something for people to take really important notice of, but it may or may not turn out to be something that matters for the Federal Open Market Committee as an economic body.” Since Mr Powell's November 1 press conference, the Israel-Gaza war has threatened to spill into other countries. Fighting between Israel and <a href="https://www.thenationalnews.com/business/economy/2023/10/18/lebanons-economy-could-collapse-completely-if-israelgaza-war-spreads-warn-analysts/" target="_blank">Lebanon</a> has escalated over the past several weeks and the Iran-backed <a href="https://www.thenationalnews.com/gulf-news/2023/11/21/houthis-rebels-israeli-ship-red-sea/" target="_blank">Houthis</a> – a Yemen-based group that supports <a href="https://thenationalnews.com/tags/hamas" target="_blank">Hamas</a> – recently seized a commercial ship they said was linked to Israel in the Red Sea. Other factors cloud the US economic picture, too. Central bank officials pointed to the possibility that interest rates could bite harder than expected, US student loan payments could constrain spending and too-strong economic activity could lead to inflation heating up again. Fed officials said they would raise interest rates again if incoming economic data showed that their current level was “insufficient”. “Participants expected that the data arriving in coming months would help clarify the extent to which the disinflation process was continuing,” the minutes read. Estimations released by the Fed earlier this year projected that interest rates would increase once more by 25 basis points to the range of 5.50 per cent to 5.75 per cent this year, although recent comments made by banking officials have suggested otherwise. A vast majority of traders expect interest rates will remain unchanged in December, according to data from the CME Group.