The most important points in the US Federal Reserve’s statement

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Investing.com – The American report was issued moments ago to reveal Fed members’ fear of…

The most important points in the US Federal Reserve’s statement

• The interest rate is currently peaking at 5.5%.
• Members need more evidence of falling inflation before they start cutting interest rates
• The Fed is alert to the risks of a rebound in inflation
• In the second half of 2024, Fed Chairman Jerome Powell will release the next 5-year review.
• Only two Fed members mentioned their concerns about keeping rates high, but the majority considered the risks of an early cut.
• Fed funds futures are pricing in the first rate cut next June.

Market movement following the release of the Fed meeting minutes

The cautious tone of the US Federal Reserve meeting minutes led to the American strengthening to settle near the 104 level, specifically at 103.910 against a basket of foreign currencies now.

Meanwhile, spot contracts are losing 0.16% at the present time to reach $2036.4 per ounce, while remaining at $2025.84 per ounce at the present time.

On the other hand, the main indices of the American market fell by varying percentages, as it fell by 0.63% to 15,530, and the index fell by 0.14%, and the index fell by 0.19%.

It is currently trading down 1.18% and trading at $50,894 per token. While Ethereum is currently falling to $2,906.77 per currency, a decline of 0.8%.

The rest of the news is below

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US Federal Reserve Minutes Statement

Fed officials indicated at their latest meeting that they were in no rush, and expressed both optimism and caution about the situation, according to minutes of the session released on Wednesday.

The discussion came as policymakers not only decided to leave their key overnight borrowing rate unchanged, but also changed their post-meeting statement to indicate that no cuts would be made until the Federal Open Market Committee, which sets interest rates, “gains confidence.” greater decline in inflation. .

The meeting summary indicated a general sense of optimism that the Fed’s policy moves succeeded in lowering the inflation rate, which in mid-2022 reached its highest level in more than 40 years.

However, officials indicated they wanted to see more before starting to ease policy, while saying interest rate hikes were likely over.

“When discussing monetary policy expectations, participants viewed interest rates as likely to have peaked during this tightening cycle,” the minutes said. But they added that they do not believe it would be appropriate to lower the target range for the federal funds rate until they gain greater confidence that inflation is moving sustainably toward 2 percent.

Before the meeting, a series of reports showed that inflation, while still high, was moving toward the Fed’s 2% target. While the minutes assessed the “strong progress” that had been made, the committee viewed some of this progress as “idiosyncratic driven” and perhaps by factors that would not last.

As a result, members said they would “carefully evaluate” the incoming data to judge where inflation is headed in the long run. Officials cited both upside and downside risks and expressed concern about cutting interest rates too quickly.

Officials “remain concerned that high inflation continues to hurt households, especially those with limited means to absorb higher prices,” the minutes said. “While inflation data indicated a significant decline in inflation in the second half of last year, participants noted that they would carefully evaluate the incoming data to judge whether inflation was moving sustainably lower towards 2%.”

The minutes reflect an internal debate about how quickly the Fed will want to act given uncertainty about the outlook.

“Participants highlighted the uncertainty associated with how long a restrictive monetary policy stance will need to be maintained,” the summary said. “Most participants pointed out the risks of moving too quickly to ease the policy stance and stressed the importance of carefully evaluating incoming data to judge whether inflation is moving sustainably to 2 percent.”

Since the meeting on January 30-31, the cautionary approach has proven to have real merit, as separate readings for consumer and producer prices showed inflation hotter than expected and still well ahead of the Fed’s 2% 12-month target.

Many officials in recent weeks have signaled a patient approach to easing monetary policy. The stable economy, which grew at an annual rate of 2.5% in 2023, encouraged FOMC members that a series of 11 interest rate increases implemented in 2022 and 2023 did not significantly hinder growth.

On the contrary, it continued to expand at a rapid pace, adding 353,000 nonfarm payrolls in January. Economic data for the first quarter so far stands at 2.9%, according to the Federal Reserve Bank of Atlanta.

Besides discussing interest rates, members also raised the bond holdings on the Fed’s balance sheet. Since June 2022, the central bank has allowed more than $1.3 trillion in mortgage-backed securities to be distributed instead of reinvesting the proceeds as usual.

The minutes indicated that a more in-depth discussion would be held at the March meeting. Policymakers also indicated at the January meeting that they were likely to take a slow approach in a process called “quantitative tightening.” The relevant question here is how high reserves must be to meet the needs of banks. The Fed describes the current level as “ample.”

“Some participants noted that given the uncertainty surrounding estimates of the ample level of reserves, slowing the pace of the runoff could help ease the transition to that level of reserves or may allow the Committee to continue the runoff for a longer period,” the minutes said. . “In addition, a few participants noted that the rebalancing process could continue for some time even after the Committee begins lowering the target range for the federal funds rate.”

Fed officials see current policy as restrictive, so the big question going forward is how much it will need to be eased to support growth and control inflation.

There are some concerns that growth is still too fast. The CPI rose 3.1% on a 12-month basis in January – 3.9% excluding food and energy, the latter of which recorded a significant decline during the month. The so-called fixed CPI, which affects housing prices and other prices that don’t fluctuate much, rose 4.6%, according to the Federal Reserve Bank of Atlanta. Producer prices rose 0.3% on a monthly basis, well above Wall Street expectations.

2024-02-21 19:02:00
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