FOMC Meeting Minutes – What you should know
- The US Federal Reserve released the meeting minutes from the May 2 monetary policy meeting where interest rates were left unchanged
- Fed officials were rather mixed but the overwhelming consensus was that a rate hike was needed
- The US central bank is also building up expectations that it will begin to unwind its $4.5 trillion balance sheet
- The CME Futures Fed funds probability tool showed the odds of a rate hike rising to 83%, up from just 60% a week before
FOMC Meeting Minutes Summary
The FOMC meeting minutes that were released yesterday from the May 2 meeting failed to boost the prospects of a stronger dollar as the US dollar slipped after the meeting minutes was released.
The US dollar index extended the declines from Tuesday and continued trading near the 6-month lows that were formed earlier this week.
The meeting minutes showed that overall, policymakers judged that it would be prudent to wait for more evidence that indicates a slowdown in the pace of economic activity before tightening monetary policy further.
Fed officials mixed on the US economic outlook
In the meeting minutes, the Fed officials expected that interest rates will continue to rise although the US economy looked to have weakened in the first quarter. However, some officials expressed concerns that the weakness in the economy came from both inflation and economic growth, warranting a more cautious approach.
The weakness in the US dollar was attributed to a dovish tone from the minutes as investors expected to see a more confident signal on the rate hikes. After the meeting in May, the markets had priced in a probability of a rate hike in June.
The divisions within the FOMC members continued with some looking past the recent trend of weak economic growth while others expressing concerns on the slowdown in inflation. Members argued that if wages rose quicker and if there was any significant fiscal stimulus plan put forth by President Trump, the pace of rate hike could quicken.
