The FOMC Meeting Minutes may reveal more about the next steps due by the Federal Reserve.
Amid the greater uncertainty, which has caused USA business and consumer confidence to wane and led firms to hold off on new investments, Fed officials “suggested that it was not yet clear” what adjustments in the policy interest rate“may be appropriate later this year”.
The bar to restarting rate hikes in the near-term seems to be quite high, with several participants arguing that rate increases would be necessary “only if inflation outcomes were higher than in [the] baseline outlook”.
The U.S. central bank caught markets off guard last month by suspending a three-year campaign to raise interest rates, saying it would be patient about making any adjustments to its target range for short-term interest rates, now at between 2.25 percent and 2.5 percent.
The surprisingly dovish decision came amid mounting headwinds to USA growth, including slowing Chinese and European economies and waning stimulus from the 2018 United States tax cuts.
The minutes covered the Fed’s January 29-30 meeting where the central bank left its key policy rate unchanged and signaled a major pivot away from steadily raising rates.
Fed governors speaking since the January pledge of patience have expressed differing opinions about rates and the current strength of the USA economy.
The minutes are expected to reaffirm the Federal Reserve’s statement last month that it would be “patient” with further rate hikes after markets swooned late in December on fears of an economic slowdown. It is not a solicitation to make any exchange in commodities, securities or other financial instruments.
The Fed absorbed government bonds and mortgages in the wake of the 2007-09 recession but policymakers began trimming those holdings in the final months of 2017.
“Investors expect more details regarding the shrinking of the Fed’s balance sheet and obviously more clues on the Fed pause”, Peter Cardillo, chief market economist at Spartan Capital Securities, wrote in a client note.
In response to the global slowdown, several Fed officials trimmed their economic outlooks while acknowledging that downside risks had increased, the minutes showed.
It was unclear if the Fed meant the sentence to suggest that the runoff, now capped at US$50 billion a month, would actually end this year.
The Federal Open Market Committee is slated to release minutes from its January meeting at 2 p.m. ET (1900 GMT), offering more clues on monetary policy.