The U.S. Federal Reserve (Fed) released the minutes of its December meeting on Wednesday (4th), showing that none of the 19 officials expected to cut interest rates this year. Difficult to suppress inflation.
The Fed’s decision-making group, the Federal Open Market Committee (FOMC), raised interest rates by 2 yards (50 basis points) to 4.25-4.50% last month without objection, but predicted that the terminal interest rate will rise above 5%. According to the minutes of the meeting, officials welcomed the moderation in monthly inflation but hoped for more progress to reassure them that inflation was on a sustained cooling path.
Investors had hoped that the meeting minutes would provide clues regarding the magnitude of the next rate hike, or a slowdown in the pace of rate hikes in the future, but they did not. Before the release of this record, the federal funds rate futures showed that investors predicted that there was a 70% chance that the Fed would raise interest rates by 1 yard on February 1.
Policy makers, however, worry that their task of restoring price stability might become more difficult if the market surges, especially because of a misunderstanding of the Fed’s interpretation of recent inflation data.
The Fed funds futures market expects the Fed to raise interest rates to 5.25 percent this summer and then start cutting rates, but the minutes showed that not one of the 19 officials forecast a rate cut this year. Seven of them predicted rates would rise above 5% this year, while another seven said they would rise even higher.
For example, Minneapolis Federal Reserve Bank President Neel Kashkari said earlier on Wednesday that he expects Fed rates to rise as high as 5.4%.
Policymakers are trying to balance the risks of avoiding doing too little to fuel inflation while avoiding raising rates too far and triggering an unnecessary slowdown.
After the minutes of the meeting were released, the gains of US stocks were curtailed, the yield of 2-year government bonds sensitive to monetary policy rose, and the dollar remained depreciated.
“They haven’t seen the light at the end of the inflation tunnel yet,” said Derek Tang, an economist at LH Meyer. “They’re clearly still on high alert for ‘unwarranted’ financial easing, which means a 2-yard rate hike in February is still biased.” .”
