During their recent monetary policy meeting, US Federal Reserve officials reached a consensus to approach decisions "cautiously," indicating a reluctance to raise interest rates unless progress against inflation falters, as outlined in the minutes dated from October 31 to November 1.
This evidences a notable change in sentiment within the Federal Open Market Committee, with diminishing support for additional rate hikes.
Despite the Fed not officially signaling an end to its fight against rising prices, the minutes highlight a shift in focus regarding how long the central bank intends to maintain interest rates in the 5.25%-5.50% range.
The minutes reveal that any further tightening of monetary policy will only be considered if there is insufficient progress in meeting inflation targets.
The September minutes of the Federal Reserve's prior meeting lacked this statement. At that point, the prevailing expectation among "most participants" persisted, envisioning the need for an additional rate hike within a tightening cycle that had resulted in a cumulative 5.25 percentage point rise in interest rates over the preceding 20 months.
The latest economic report indicates unanimous agreement among participants to maintain current rate levels, with detailed forecasts for the economy, interest rates, and the US dollar scheduled for presentation at the Fed meeting on December 12-13.
While the minutes had a muted impact on financial markets, supporting the notion that the Fed may have ended its rate hike cycle without explicit confirmation, associated contracts indicate almost zero probability of further rate hikes. The likelihood of a rate cut at the Fed's April 30-May 1, 2024 meeting increased slightly to around 60% after the minutes' release, according to CME Group's FedWatch Tool.
Post-minutes, US stocks experienced slight declines, the US dollar strengthened against a basket of currencies, while US Treasury yields fell.
The minutes also indicate that Federal Reserve members are grappling with conflicting economic signals, increasing bipartisan risks to the economy. They are concerned that despite a rise in inflation, overly restricting credit might negatively impact the economy's outlook, leading to a position described as “cautiously hawkish.”Login in Personal Account