The conservative stance of FED bankers, a lot may depend on tomorrow's CPI report💡
The market reaction was not decisive after the publication of the Minutes, although the dollar weakened in the initial response. Risk-related assets gained slightly in value after comments from bankers contained in the FED Minutes. Overall, the tone of the report is conservative; bankers suggest that it is currently necessary to carefully analyze the appropriateness of further increases, as the disparity between the need for further inflation fighting and the economic situation (especially in the labor market) narrows. Decision-makers indicated that further decisions will depend on incoming macro data, so the CPI report from the USA scheduled for tomorrow may be crucial for further FOMC decisions.
Key takeaways from the Minutes:
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Create account Try a demo Download mobile app Download mobile app- Most Fed representatives considered another rate hike appropriate.
- "Critical" to maintain a policy restrictive enough to bring inflation to target.
- Officials saw threats from rising energy prices, banking tensions, slowdown in China.
- Officials stated they need more data indicating weakening inflationary pressure.
- The Fed meeting took place before the recent increase in bond yields.
- According to the FOMC board, the labor market remains very strong, consumers remain resilient to higher interest rates, although some signs of weakening are already visible. The business sector remains moderately strong.
- The market shows evidence of decreasing price pressure, but it's too early to declare victory. Upcoming data will be essential to confirm the inflationary trend.
EURUSD gained in the initial reaction after the publication of the Minutes report. However, the upward movement was partially offset later. The market reaction was moderate ahead of tomorrow's publication of US CPI data. EURUSD remained in its current short-term channel.
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