This week it is all about the US economic and macroeconomic data. Yesterday, the market participants awaited the FOMC Meeting Minutes, eager to know what the FOMC members discussed three weeks ago when they decided on the monetary policy.
The dollar surged, and stocks tanked as the minutes revealed a still hawkish Fed. Here are the three main takeaways from yesterday’s minutes:
Fed members remain inclined to more hikes to curb inflation
Almost all participants agreed on the 25bp rate hike in February
Some of the participants favored a 50bp rate hike
Fed members won’t stop their fight against inflation
One thing that draws attention is that the Fed is not done in its fight against inflation. In other words, the road ahead to bring inflation to target remains long, and more hikes are needed.
However, the members agreed that slowing the pace of rate hikes was appropriate.
Almost all members agreed February’s 25bp rate hike
In February, the Fed raised the funds rate by another 25bp. Almost all members of the FOMC agreed with the hike, but some did not.
The market took it that the ones that did not agree wanted a bigger hike. For this reason, stocks tanked and the US dollar surged across the FX dashboard immediately after the minutes were released.
Some FOMC members favored a 50bp rate hike
Some members favored a 50bp rate hike, which was likely James Bullard’s case. He is the St. Louis Fed President and a very influential Fed member.
A CNBC article published before the minutes’ release stated that Fed’s James Bullard pushes for faster rate hikes. It was enough for stocks to dive before the minutes’ release and for the dollar to strengthen.
🇺🇸 #Fed’s James Bullard pushes for faster rate hikes, sees ‘good shot’ at beating #inflation – CNBChttps://t.co/GzgIH5M59V
— Christophe Barraud🛢🐳 (@C_Barraud) February 22, 2023
Summing up, the minutes turned out to be hawkish. But the trading week is still young.
Later today, traders will find out the US GDP and tomorrow, the PCE Core inflation. Both are critical for the Fed in deciding the future path of the funds rate.
Thus, they are critical to financial markets too.
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