FOMC minutes: Further tightening would be appropriate if progress toward inflation objective was insufficient


  • Federal Reserve released the minutes from its October 31 - November 1 meeting.
  • The minutes showed that members agreed that policy decisions would continue to be based on totality of incoming information. 
  • US Dollar remains steady after the minutes, holding to modest gains. 

The Federal Open Market Committee (FOMC) released the minutes of its November meeting, when the Fed held interest rates unchanged in the range 5.25% to 5.5%, as expected. The document showed that participants noted that further policy tightening would be appropriate if progress to the inflation target was insufficient. 

Key takeaways from the minutes: 

Participants assessed that while labor market conditions remained tight, they had eased since earlier in the year, partly as a result of recent increases in labor supply.

Participants judged that the current stance of monetary policy was restrictive and was putting downward pressure on economic activity and inflation.

They also stressed that further evidence would be required for them to be confident that inflation was clearly on a path to the Committee's 2 percent objective. 

Participants observed that the labor market remained tight.

Participants noted that in recent months, financial conditions had tightened significantly because of a substantial run-up in longer-term Treasury yields, among other factors. 

As upside risks to inflation, participants cited the possibility that progress on disinflation stalls or inflation reaccelerates because of continued momentum in economic activity.

While inflation had moderated since the middle of last year, it remained well above the Committee's longer-run goal of 2 percent, and participants remained resolute in their commitment to bring inflation down to the Committee's 2 percent objective.

All participants judged it appropriate to maintain the target range for the federal funds rate at 5¼ to 5½ percent at this meeting. Participants judged that maintaining this restrictive stance of policy at this meeting would support further progress toward the Committee's goals while allowing more time to gather additional information to evaluate this progress. 

All participants agreed that the Committee was in a position to proceed carefully and that policy decisions at every meeting would continue to be based on the totality of incoming information and its implications for the economic outlook as well as the balance of risks. 

Participants noted that further tightening of monetary policy would be appropriate if incoming information indicated that progress toward the Committee's inflation objective was insufficient.

Participants expected that the data arriving in coming months would help clarify the extent to which the disinflation process was continuing, aggregate demand was moderating in the face of tighter financial and credit conditions, and labor markets were reaching a better balance between demand and supply. 

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.

Participants generally judged that, with the stance of monetary policy in restrictive territory, risks to the achievement of the Committee's goals had become more two sided. But with inflation still well above the Committee's longer-run goal and the labor market remaining tight, most participants continued to see upside risks to inflation. 

Many participants commented that even though economic activity had been resilient and the labor market had continued to be strong, downside risks to economic activity remained

Market reaction

The US Dollar Index rose further after the minutes, reaching a fresh daily high at 103.70; extending the recovery from the monthly lows. 


 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD retreats below 1.0850 after upbeat US PMI data

EUR/USD retreats below 1.0850 after upbeat US PMI data

EUR/USD lost its traction and declined below 1.0850 in the American session on Thursday. Upbeat PMI data from the US, combined with the mixed action seen in Wall Street's main indexes, helps the US Dollar gather strength and weighs on the pair.

EUR/USD News

GBP/USD falls toward 1.2700 as USD benefits from PMI data

GBP/USD falls toward 1.2700 as USD benefits from PMI data

GBP/USD came under modest bearish pressure and declined toward 1.2700 in the second half of the day on Thursday. The US Dollar (USD) benefits from the PMI data, which showed an ongoing expansion in the private sector at an accelerating pace, and weighs on the pair.

GBP/USD News

Gold extends slide below $2,350 as US yields push higher

Gold extends slide below $2,350 as US yields push higher

Gold stays on the back foot and trades at its lowest level in over a week below $2,350. The benchmark 10-year US Treasury bond yield rises more than 1% following the stronger-than-forecast PMI data from the US, forcing XAU/USD to stretch lower.

Gold News

As Ethereum spot ETF approval nears, these altcoins could explode

As Ethereum spot ETF approval nears, these altcoins could explode

It is not surprising that altcoins related to Bitcoin saw a major rally post-Bitcoin spot ETF approval. Likewise, tokens closely related to Ether could ride the ETF approval wave. Ethereum Classic, Pepe, Floki and other DeFi tokens could gain momentum as the ETH ETF approval deadline nears. 

Read more

US S&P Global PMIs Preview: Economic expansion set to persist in May

US S&P Global PMIs Preview: Economic expansion set to persist in May

On Thursday, S&P Global will issue its flash estimates of the United States (US) Purchasing Managers Indexes (PMIs), a monthly survey of business activity. The survey is separated into services and manufacturing output and aggregated into a single statistic, the Composite PMI.

Read more

Forex MAJORS

Cryptocurrencies

Signatures