Fed meeting minutes agree on caution about future increases in…

Bloomberg – At their latest meeting, Federal Reserve policymakers coalesced around a “cautious move” strategy on future interest rate moves and basing any additional tightening on progress toward the inflation target.

“All participants agreed that the committee is in a position to proceed cautiously and that policy decisions at each meeting will remain informed “In the totality of the information received,” according to minutes of the Federal Open Market Committee meeting held between October 31 and November 1, which were published Tuesday in Washington.

At the meeting, US central bankers kept the benchmark interest rate between 5.25% and 5.5% for the second time in a row, despite a series of data showing strong consumption and employment, which boosted overall economic growth.

The minutes show that the committee was willing to take a patient approach to inflation, While future political decisions will depend on the statistics that arrive.

Participants expected that the data arriving in the coming months would help clarify the extent to which the process of slowing inflation continues, that aggregate demand has moderated in the face of tightening financial and credit conditions, and that labor markets have achieved a greater balance between demand and supply,” the minutes stated.

Reaction from bonds and stocks after the release of the Fed meeting minutes was limited. The 10-year Treasury yield rose 1 basis point to 4.42%, while the S&P 500 fell 0.2%. The Bloomberg Dollar Index was barely changed.

Federal Reserve officials met in Washington after a slide in bonds sent 10-year U.S. Treasury yields above 5%, a 16-year high. The rise in long-term borrowing costs has raised concerns among some officials, who say that tightening financial conditions leads to further hikes in interest rates.

“Participants highlighted that long-term returns can be volatile and that the factors behind the recent rally, as well as its continuation, are uncertain.” According to the record. “However, they also noted that, whatever the source of the rise in long-term yields, ongoing changes in financial conditions could have implications for the path of monetary policy, and it will therefore be important to continue to closely monitor market development.”

Operator Bets

Since then, public finances have deteriorated, and 10-year government bond yields have returned to September levels. Traders have reduced the likelihood of an interest rate increase to near zero, and are betting that the Federal Reserve will start cutting interest rates as early as May.

The committee is trying to manage the tension between two risks: avoiding excessive increases that could lead the economy into recessionAnd not tightening interest rates enough to calm consumption and return the inflation rate to 2% in time.

“Participants noted that inflation has moderated over the past year, but stressed that current inflation remains unacceptably high and well above the Committee’s long-term target of 2%,” according to the minutes. “They also stressed that more evidence was needed to confirm that inflation was clearly on the path to the committee’s 2% target.”

In September, Fed officials expected interest rates to rise another quarter point by the end of the year.

The November meeting equaled Powell’s record of 11 consecutive meetings without opposition. The Fed chief, appointed by President Donald Trump and reappointed by President Joe Biden, has a lower dissent rate per meeting than any of his four predecessors.

GDP grew at an annual rate of 4.9% in the third quarter, the fastest pace in almost two years. Job gains remain strong While inflation, as measured by the Fed’s preferred price index, has begun to cool.

The personal consumption expenditures price index, excluding food and energy, rose 3.7% in the year to September, and 2.4% at the three-month annual rate in the same month.

“Inflation has given us some headaches,” Fed Chairman Jerome Powell said at an International Monetary Fund panel on November 9. “However, we will continue to move cautiously, allowing us to address the risk of being misled by a good few months of data, and the risk of overshooting.”

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