Since the last FOMC meeting, on November 1st, the dollar has tumbled over 3% sending stocks, bonds, and bitcoin all higher (and gold, though only marginally)…

Source: Bloomberg

Rate-change expectations have shifted significantly more dovish with more rate-cuts priced-in sooner in 2024 (with nearly 100bps of cuts priced-in for next year)…

Source: Bloomberg

The yield curve (2s30s) has flattened (re-inverted) dramatically too…

Source: Bloomberg

Perhaps most notably, since The Fed highlighted the fact that the market “was doing its job” (by tightening financial conditions), US macro data has serially disappointed and financial conditions have loosened dramatically…

Source: Bloomberg

The point of all that is to suggest the market is now convinced The Fed is done hiking (and just as convinced they will start cutting soon) and so today’s Minutes will be analyzed for any insights into that narrative.

The problem – of course – is that the Minutes are stale and have missed significant events from the macro side (soft payrolls and CPI data for example); and as a reminder, Powell, speaking around a week after the FOMC meeting, struck a more hawkish tone, and said that although progress had been made on inflation, there was still a “long way to go”.

Additionally, FedSpeak has been hawkish since The Minutes: Applying Bloomberg Economics’ natural language processing model to Fedspeak, recent committee statements still indicate a hawkish tilt — though moving toward neutral.

This primarily reflects members seeking to transmit caution and convey a higher-for-longer stance.

So, what do The Minutes show?

These are the key takeaways from minutes of the Fed’s latest meeting:

“All” officials supported the decision to hold the benchmark rate in a 5.25%-5.5% target range, indicating the broader 19-member Federal Open Market Committee was also united, in addition to the 12-0 decision among voting members.

Policymakers agreed that the Fed “was in a position to proceed carefully” on whether to hike again and should condition further tightening on whether sufficient progress has been made in bringing down inflation

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.

All officials judged it would be appropriate to keep rates at a level restricting the economy “for some time until inflation is clearly moving down sustainably” toward the Fed’s 2% inflation goal

In discussing the policy outlook, participants continued to judge that it was critical that the stance of monetary policy be kept sufficiently restrictive to return inflation to the Committee’s 2 percent objective over time.

A majority of participants judged that one more increase in the target federal funds rate at a future meeting would likely be appropriate, while some judged it likely that no further increases would be warranted.

Most policymakers saw the risks to inflation as weighted to the upside.

“The staff continued to view the uncertainty around the baseline projection as considerable. Risks around the inflation forecast were seen as skewed to the upside, given the possibility that inflation could prove to be more persistent than expected or that further adverse shocks to supply conditions might occur.

Should these upside inflation risks materialize, the response of monetary policy could, if coupled with an adverse reaction in financial markets, tilt the risks around the forecast for economic activity to the downside.”

Fed staff expected below-potential growth over next two years

But of course, as we noted above, this was before the soft jobs and CPI data.

Developing…

Read the full Minutes below: