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Investing.com – The minutes of the latest US Federal Reserve meeting have been released, and markets have been waiting to see if the Fed is serious about going hard-line for the rest of the year.
markets now
It is now up 0.56% to $1856.06 an ounce, while its spot contracts are up 0.56% to $1849.89 an ounce, while American is down 0.20%. %, registering 104.095 against a basket of foreign currencies.
While yields on 30-year and 10-year bonds are still down more than 1%, while yields on 10-year Treasuries fell 1.80% to 3.724%.
It rose 0.46% to 1.0595 against the dollar.
And in recent minutes the American markets have marked a strong rise, rising by 0.52%, while the BT has risen by 0.17% and the S&P 500 by 0.60%.
Oil sales are still continuing as they fell 4.58% to $73.39 a barrel, while they were down 4.69% to $78.26 a barrel.
Fed officials are busy fighting inflation and expect higher interest rates to stay in place until further progress is made, according to the central bank’s December meeting minutes released on Wednesday.
At a meeting where policy makers raised the key interest rate by another half percentage point, they voiced the importance of keeping tightening policy in place while inflation remains unacceptably high.
The summary of the meeting stated: “It was generally the view of the participants that the restrictive policy stance should be maintained until incoming data provides certainty that inflation is on a sustainable downward trajectory towards 2%, the that would take some time”.
Members believed that, in light of the persistent and unacceptable level of inflation, many participants commented that historical experience warns against premature easing of monetary policy.
Increase of 50 basis points
The hike ended a streak of four consecutive three-quarter rate hikes, taking the target range for the federal funds rate to 4.25%-4.5%, the highest level in 15 years.
Officials also said they would focus on the data to determine their next decisions, stressing that the Fed must remain flexible and open with its monetary policy.
There’s no going back.. Slowing down doesn’t mean turning around
Officials also warned that investors and the public should not read and buy into the FOMC’s move to frontload the pace of hikes and higher rates.
This was reflected in the assertion by some participants that it would be important to state clearly that the slowdown in the pace of price increases does not indicate any weakness in the Committee’s determination to achieve its price stability objective or a judgment that inflation was already en route.
Jerome Powell explains
Following the meeting, Fed Chair Jerome Powell noted that while there has been some progress in the battle against inflation, he has seen only signs of setback and expects rates to remain at higher levels even after the stalemate of increases.
The minutes reflected that sentiment, noting that no FOMC member expects rate cuts in 2023, despite market rates.
next interest decision
Markets are currently pricing in the potential for price hikes totaling 0.5-0.75 percentage points before taking time to assess the impact of the hikes on the economy. Traders expect the central bank to agree to a quarter-point hike at its next meeting, which ends on Feb. 1, according to data from CME Group.
The current price also indicates the possibility of a slight drop in rates later this year, with the monetary rate hovering around the 4.5%-4.75% range. However, Fed officials have repeatedly expressed skepticism about any policy easing in 2023.
The minutes found officials grappling with two policy risks: one, that the Fed does not keep interest rates high enough and allows inflation to worsen, similar to the experience of the 1970s; And second, if the Fed maintains its policy tightening for too long and slows the economy too much, it will “likely place the greatest burden on the most vulnerable segments of the population.”
However, members said they believe risks are more likely to abate too soon and allow inflation to run rampant.
“Overall, participants noted that upside risks to inflation expectations remained a major factor in shaping the policy outlook,” the minutes said. “Respondents generally noted that holding a tight policy stance for an extended period until inflation is on a clear path around 2% is appropriate from a risk management perspective.”
Inflation and the Fed’s balance sheet
In addition to raising interest rates, the Fed has reduced the size of its balance sheet by allowing up to $95 billion in proceeds from outstanding maturities each month instead of reinvesting them. In a program that began in early June, the Fed has seen its balance sheet shrink by $364 billion to $8.6 trillion.
While some recent measures of inflation have shown progress, the labor market, a critical target for rate hikes, has been resilient. Nonfarm payroll growth beat expectations for most of last year and last Wednesday’s data showed that the number of job vacancies remains nearly double the total available workers.
The Fed’s preferred measure of inflation, the PCE price index excluding food and energy, was at 4.7% annually in November, down from a peak of 5.4% in February 2022, but still well above of the Fed’s 2% target.
Meanwhile, economists largely expect the US to enter a recession in the coming months, following the Fed tightening and the economy’s handling of inflation still near 40-year highs. Still, fourth-quarter 2022 GDP is posting a solid 3.9 percent, the best in a year that started with consecutive negative readings, according to the Atlanta Federal Reserve.
Minneapolis Federal Reserve Bank President Neel Kashkari said in a post on the county website Wednesday that he sees the monetary rate rise to 5.4 percent and possibly higher if inflation doesn’t come down.
