FOMC minutes secure market's expectations for a June rate hike of 25bps


The minutes from the Federal Reserve’s May 1st-2nd meeting monetary policy meeting have been published, revealing that the Committee discussed their outlook for the economy and rates, where all agreed on the inflation target should be met in coming months.

Subsequently, in a risk-off marketplace at the moment, (JPY well bid), where US stocks have been unable to get off the floor in any meaningful or sustained correction,  on the knee-jerk, however, the DJIA rallied while the S&P 500 also popped, robust against the daily declines.

The dollar is steady at 94.18, while the 2-year treasury 2.559%, The VIX is at 13.53. Gold is also slightly higher.

Key notes from the minutes:

  • Modest inflation overshoot 'could be helpful'
  • Most felt it would 'soon be appropriate' to hike should outlook remain intact
  • Trade raised a 'particularly wide' range of risks
  • A few noted that Fed funds could reach neutral level 'before too long' if rate increases continued
  • Some noted it may soon be appropriate to change guidance
  • Many saw little evidence of overheating of labor market with wage pressures 'still moderate'
  • A few cautioned that inflation expectations remained somewhat low
  • Most viewed firming of inflation as providing 'reassurance' that 2% would be reached
  • Some officials saw forward-guidance revisions appropriate soon

Key quotes from the FOMC Minutes:

Voting for this action: Jerome H. Powell, William C. Dudley, Thomas I. Barkin, Raphael W. Bostic, Lael Brainard, Loretta J. Mester, Randal K. Quarles, and John C. Williams. Voting against this action: None.

"In their discussion of the economic situation and the outlook, meeting participants agreed that information received since the FOMC met in March indicated that the labor market had continued to strengthen and that economic activity had been rising at a moderate rate."

"Participants viewed recent readings on spending, employment, and inflation as suggesting little change, on balance, in their assessments of the economic outlook."

"The information reviewed for the May 1–2 meeting indicated that labor market conditions continued to strengthen in the first quarter, while real gross domestic product (GDP) rose at a moderate pace. Consumer price inflation, as measured by the 12‐month percentage change in the price index for personal consumption expenditures (PCE), was 2 percent in March. Survey‐ based measures of longer-run inflation expectations were, on balance, little changed."

“Modestly above 2 percent would be consistent with the committee’s symmetric inflation objective and could be helpful in anchoring longer-run inflation expectations,..."it would likely soon be appropriate for the Committee to take another step in removing policy accommodation".

"The FOMC’s decision to raise the target range for the federal funds rate 25 basis points at the March meeting was widely anticipated. Market reaction to the release of the March FOMC minutes later in the intermeeting period was minimal. The probability of an increase in the target range for the federal funds rate occurring at the May FOMC meeting, as implied by quotes on federal funds futures contracts, remained close to zero; the probability of an increase at the June FOMC meeting rose to about 90 percent by the end of the intermeeting period. Expected levels of the federal funds rate at the end of 2019 and 2020 implied by OIS rates rose modestly."

Related articles and previous Fed chatter

About the FOMC minutes

FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.

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.

Feed news

How do emotions affect trade?
Follow up our daily analysts guidance

Subscribe Today!    

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD slides under 1.16 as US Retail Sales smash estimates

EUR/USD is trading under 1.16 after US Retail Sales smashed estimates with 0.7% in September. Treasury yields are rising. The risk-on mood continues to underpin the pair, as the ECB policymaker Wunsch dismisses inflation concerns. 

EUR/USD News

GBP/USD retreats below 1.3750 after US data

GBP/USD has pared some of its gains after US Retail Sales beat estimates, with the core group hitting 0.8% last month. Earlier, investors shrugged off dovish comments from two BOE members. 

GBP/USD News

XAU/USD slumps to $1,770 area on upbeat US data, surging US bond yields

Gold started the last day of the week on the back foot and extended its slide to a fresh daily low of $1,770 in the early trading hours of the American session pressured by the dollar's resilience and surging US Treasury bond yields.

Gold News

Crypto bulls on winning streak pushing for more

Bitcoin price favors bulls reaching $60,000 by the end of this week and onwards to new all-time highs by the end of next week. Ethereum price broke a bearish top line and could hit new all-time highs by next week in tandem with Bitcoin. 

Read more

Why is Tesla going up?

Tesla's (TSLA) stock price has finally pushed higher in a series of steady and sure moves. We had nearly given up on our bullish call with Tesla stock as it kept struggling around the $800 level.

Read more

Forex MAJORS

Cryptocurrencies

Signatures