FOMC Minutes Show Rate Hikes Are Still On The Table

Key Insights

• FOMC Minutes indicate that Fed is prepared to raise rates if necessary. 
• Some Fed members are worried that Fed may face a tradeoff between its dual mandate goals. 
• Traders cut their bets on dovish Fed, which is bullish for U.S. dollar and bearish for stocks.

On January 3, 2024,  Fed released FOMC Minutes. This was a long-awaited release as markets have already started to price in aggressive rate hikes from the Fed in the first half of 2024.

The minutes indicated that Fed officials remained prepared to raise rates further if appropriate. Today, Fed’s Barkin confirmed this view, noting that demand remained strong.

Interestingly, several officials believed that Fed may have to keep the federal funds rate at current levels for longer than was anticipated by markets.

Fed officials believed that “it would be appropriate for policy to remain at a restrictive stance for some time until inflation was clearly moving down sustainably toward the Committee’s objective”. Interestingly, several participants suggested that Fed could face a tradeoff between its dual-mandate goals.

It looks that FOMC Minutes were more hawkish than markets anticipated. Perhaps, Fed is not ready for aggressive rate cuts as it fears that inflation may come back.

U.S. Dollar Index tested new highs after the release of FOMC Minutes. Traders continue to buy U.S. dollar at the start of the year as Fed may be not as dovish as previously expected.

Gold  remained under pressure as traders focused on strong dollar. Currently, gold is trying to settle below the $2030 level.

SP500  settled near the 4720 level. SP500 remains under pressure as traders take profits in high-flying tech stocks.

For a look at all of today’s economic events, check out our economic calendar.