Update of the FED Meeting Minutes: Deep Insights and Significance for the Market

The minutes of the meeting on November 6-7 of the Federal Reserve have been published, providing valuable insights into the monetary policy trajectory of the central bank. These minutes provide a deep understanding of the complex discussions shaping the economic policies of the United States, with significant implications for both traditional and digital markets. The following is a detailed analysis of the most important points:

1. Inflation and policy stance: Some participants believe that if inflation continues to run at a high level, the Fed may have to temporarily pause the asset purchase program and maintain the policy rate at a higher level.On the other hand, if economic activity disappoints, or if the labor market deteriorates, further easing could be implemented more quickly, indicating the Fed’s readiness to respond flexibly to changing conditions.
2. Switch to neutral: The meeting minutes emphasize that many participants believe that the current level of uncertainty is related to a neutral interest rate ensuring a gradual reduction of policy constraints. There is consensus on the need to consider transitioning towards a more neutral monetary stance, balancing the risks of tightening too much or loosening too quickly.
3. Risks in the labor market and economy: Some participants noted that the negative risks to the labor market and the economy seemed to have diminished compared to previous assessments. Many participants observed that the risk of a cold labor market has decreased since the September meeting, reflecting a strong employment trend.
4. Adjusting Policy Tool: Federal Reserve officials have discussed the possibility of lowering the overnight reverse repo rate below the lower end of the federal funds range. This adjustment is aimed at fine-tuning the monetary policy framework amid changing market conditions.
5. Economic growth and dual tasks: Consistent with previous assessments, participants expressed confidence in the economy’s ability to recover, with a forecast of stronger GDP growth in 2024. The minutes reflected officials’ common view that the risks of achieving the dual goals of price stability and maximum employment remained broadly balanced.
6. Different viewpoints among officials: A notable divide persists among policymakers over the right path forward. Some believe monetary policy is approaching neutrality and may not need further cuts anytime soon. Others see room for a longer rate-cutting cycle to maintain economic momentum. Statement after Powell’s meeting: In their public statements following the meeting, Fed Chairman Jerome Powell emphasized a cautious approach to interest rate adjustments, stating that the economy “does not send any signals that we need to quickly lower interest rates”. He stressed that the Fed will “carefully” consider further cost reduction, while maintaining flexibility to address changing economic indicators. Market meaning Traditional market: Investors in the stock and bond markets may interpret this minutes as a sign of the Fed’s cautious stance. While the gradual policy easing commitment provides some assurance, the cautious tone on interest rate cuts may temper the market’s excessive optimism. Cryptocurrency market: The cryptocurrency market, often sensitive to macroeconomic signals, may see the Fed’s neutral stance as a potential benefit. Lower interest rates and supportive monetary environment are often beneficial for risky assets, including cryptocurrencies, as they make speculative investments more attractive. Looking forward: Market participants will closely monitor input data, including inflation data, labor market performance, and GDP growth, to assess the Fed’s next moves. The cautious but potentially responsive approach of the central bank highlights the complexity of navigating the post-pandemic economic landscape. In summary, the minutes of the Fed’s November meeting signaled a cautious path, with officials committed to balancing inflation control with economic growth. While uncertainty looms, the overall tone indicates that the Fed is in no hurry to make significant changes to its trajectory, ensuring stability as the market adjusts to evolving dynamics.