Fed members support keeping rates at restrictive levels for some time: Fed minutes

November 22, 2023 06:32 AM AEDT | By Investing
Follow us on Google News:

Investing.com – Federal Reserve policymakers were in support of keeping rates at restrictive levels for "some time" until inflation is clearly on a downward path, though stopped short of suggesting rate cuts were on the horizon anytime soon, according to the minutes of the Federal Reserve’s Oct. 31-Nov. 1 meeting released Tuesday.

Fed favors restrictive stance for some time amid signs policy putting squeeze on inflation

"All participants judged that it would be appropriate for policy to remain at a restrictive stance for some time until inflation is clearly moving down sustainably toward the Committee's objective," the minutes showed.

At the conclusion of its previous meeting on Nov. 1, the Federal Open Market Committee, or FOMC, kept its benchmark rate in a range of 5.25% to 5.5%.

It was the third time in a row the central bank decided to stand pat on rates as signs of slowing inflation paved the way for the central bank to continue its careful approach to monetary policy.

The consumer price index for October fell to an annualized rate of 3.2% from 3.7% in the prior month that some economists estimate will support further slowing in the core personal consumption expenditures price index, or core PCE, closely watched by the Fed as a more accurate measure of inflation.

“Incorporating inputs from CPI, we forecast core PCE inflation increased 0.17% in October vs. 0.30% in September,” Morgan Stanley said in a recent note, ahead of the next PCE data slated for Nov. 30. Core services ex housing translation points to 0.15%M in October vs. 0.42%M prior,” it added.

Slowdown in economy, labor market likely needed to bolster inflation fight

A slowing in the economy, or a period of "below-potential growth in real GDP and some further softening in labor market conditions," the minutes showed, would likely be needed to "reduce inflation pressures sufficiently to return inflation to 2 percent over time."

The slowing pace of inflation comes just as financial conditions eased in recent weeks, which could muddy the progress made to bring inflation down.

Fed acknowledges tighter financial conditions... but a lot has changed since November decision

The Fed acknowledged that in recent months financial conditions had tightening "significantly" because of a run-up in yields on longer-term Treasuries.

But Treasury yields have pulled back sharply since the meeting, undoing the tightening in financial conditions.

In November, the financial condition index, Deutsche Bank said, citing its daily version of the Fed staff's financial conditions index, has “unwound a bit over half of the tightening seen in October, though conditions remain substantially tighter than they were in late July.”

Despite the easing in financial conditions, the Fed “can afford to be less concerned with this easing given recent data showing progress on the labor market and inflation,” it added.

As bets on the end of the Fed rate-hike cycle gather steam, investors have been shifting focus to the prospect of rate cuts in the first half of next year. Fed members, however, aren't too keen to endorse the prospect of sooner rather than later rate cuts.

This article first appeared in Investing.com


The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Pty Ltd (Kalkine Media, we or us), ACN 629 651 672 and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated as or found to be necessary.

Top ASX Listed Companies

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK