The FOMC this afternoon released the meeting minutes that cover its two-day meeting and corresponding rate hike and publication of economic projections. As was widely expected, the minutes reaffirm the perception of December’s 25 basis-point increase to short-term lending rates as a “dovish hike.”
LATEST: Federal Reserve officials saw the extent and timing of future rate hikes are less clear in December meeting minutes https://t.co/yrY410ktCK
— Bloomberg Economics (@economics) January 9, 2019
Reviewing the published minutes shows a Fed that, while remaining broadly confident of it’s projections of US economic growth and the effects of its tightening of monetary policy, was aware of both how the overall picture of growth and inflation is becoming less clear (both at home and abroad;) and the colicky cries of the US equity markets who fear that the path and pace of Fed policy has become too aggressive to sustain.
Highlight: @mylesudland on FOMC minutes: "The fact that they didn’t change their economic outlook but they did acknowledge that they needed to pare back their rate forecast suggests a Fed that’s aware they were putting some stress on the market ..." https://t.co/ObzMOMFjVy pic.twitter.com/A9b02dfxBX
— Yahoo Finance (@YahooFinance) January 9, 2019
As of December, the committee seems to broadly expect two more rate hikes in 2019. These minutes inject a little more dovishness into that outlook however, by describing at committee acknowledging that the “extent and timing” of future policy is less clear than before. It is also clear in the minutes that the FOMC is confident that, at this time, they can “afford to be patient” and see if markets can make their way through volatile markets and “muted inflation.”
In the meetings, FOMC members also discussed the perceived risks to their economic outlook, which include:
- The trajectory and velocity of global growth, which is currently slowing
- Fading fiscal stimulus from tax cuts in the US.
- How (or whether) trade tensions between the US and other economies are resolved.
- Tightening financial conditions.
- Unexpected consequences of the Fed’s tightening monetary policy.
The market for the US Dollar had an immediate reaction to the minutes’ release, with the greenback falling hard against major trading partners including the drop to a three-month low against the Euro. In tandem, gold prices rallied back above $1290/oz above which the yellow metal continues to trade. Gold prices had already been elevated off the lows of the week earlier this morning with the dollar falling as Federal Reserve Bank of Atlanta President Raphael Bostic made some dovish remarks.
Gold Price Chart
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