The global markets experienced a tight trading range throughout yesterday’s trading, as everyone was waiting for the FOMC Meeting Minutes to give us some clues about the future of the Fed’s policy. However, the Federal Reserve gave us mixed signals; some were good, and other were concerning. In today’s article, we will explain the Federal Reserve meeting minutes, what does it mean for the market and what’s after the meeting minutes.
FOMC Meeting Minutes Headlines
- Almost all officials saw upside risks to growth on expectations fiscal policies will be more expansionary under Trump administration. About half of policymakers incorporated those assumptions into forecasts
- Many saw increased chance of faster rate hike pace due to higher risk of sizeable undershooting of longer-run normal unemployment rate leading to higher inflation
- Policymakers emphasized their considerable uncertainties on timing, size, and composition of legislative and spending changes
- Almost all members saw unemployment rate running below longer-term normal level
- Generally agreed to continue to closely monitor inflation
What Do We Know?
The Federal Reserve is now considering the new administration’s fiscal policy, which in theory should lead to higher inflation. This is if the administration is able to implement what they are promising. Therefore, the Fed will be monitoring inflation very carefully over the coming months.
Yet, this doesn’t mean that the Fed will be able to raise rates 3 times this year. No one can estimate how many times the Fed will raise rates, especially after last year’s failure to raise rates 4 times. However, what do we know is that the upcoming data will be the driver of the Fed’s policy.
The Fed In Concerned
In the Fed’s FOMC Meeting Minutes, it was mentioned the US Dollar strength, showing some sort of a concern, as rising USD is likely to weight on inflation and growth in the coming months, which may delay the Fed’s next rate hike and would make its job even harder, while stagflation risk will be on the rise.
