FOMC Minutes: No pre-determined path yet – UOB

Pablo Piovano FXStreet

Senior Economist at UOB Group Alvin Liew comments on the recent publication of the FOMC Minutes of the January event.

Key Takeaways

“The Jan FOMC minutes noted that most participants thought it was warranted the Federal Reserve should hike the Fed Funds Target Rate (FFTR) at a faster pace this time compared to 2015 due to the current conditions of stronger economic growth outlook, much higher inflation and tighter employment market.”

“But the minutes also showed that the Fed is not committed yet to any policy path/trajectory. Instead, the Fed ‘will be updating their assessments of the appropriate setting for the policy stance at each meeting’, implying every meeting will be ‘live’ and data dependent but it did not talk about a potentially bigger opening rate hike in Mar or that it will hike in every meeting this year. Even though the minutes highlighted the balance of inflation risks is on the upside, markets still viewed this latest minutes as less hawkish compared to the comments by FOMC Chair Powell during the press conference of the Jan FOMC two weeks ago.”

“However, it should be noted the FOMC minutes predated the elevated Jan CPI inflation spike and the recent Jan wage surge, and these data had heightened the risk of more aggressive and frequent Fed rate actions. As such, we still keep our expectations for the Fed to start the rate hike cycle with a 50bps rate hike in Mar FOMC, followed by clips of 25bps rate hikes for another 4 meetings in May, Jun, Sep and Dec FOMC bringing the FFTR to 1.50%-1.75% by end-2022.”

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

GBP/USD surges to multi-day peaks past 1.3250

GBP/USD leaves behind Friday’s small pullback and advances past 1.3250 level, or five-day highs, on Monday. Cable’s upside follows extra losses in the Greenback, while traders continue to assess the geopolitical front and upcoming key events.

EUR/USD softens to near 1.1400 as ECB tightening bets fade

The EUR/USD pair trades with mild losses around 1.1415 during the early Asian session on Tuesday. The Euro softens against the US Dollar as traders reduce their bets on the European Central Bank rate hikes this year.

Gold crashes with Japanese Yen as stops likely triggered

Gold is down nearly 1.50% so far in Tuesday’s Asian trading, sitting at a fresh seven-month low as the key $3,950 psychological barrier gave way amid a renewed wave of selling.

Bitcoin stalls at $60K as buyer conviction fades, Strategy authorizes BTC sales

Bitcoin is trading around the $60,000 level on Monday after a sharp decline last week. With the top crypto struggling to recover, analysts suggest the market remains firmly in defensive territory as investors await stronger signs of demand.

Just like Fed, is BoJ’s independence under threat?

When talking about central bank independence, most of the focus has been on Donald Trump’s pressure on the Federal Reserve. But a similar story, a quieter one for now, seems to be happening on the other side of the Pacific: Japan’s government may be testing the Bank of Japan’s independence.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.