URGENT: Hawkish FOMC minutes fail to halt market gains

The minutes from the Committee’s recent meeting align with the signals conveyed during Chair Powell's latest press conference. It is worth recalling that three policymakers opposed the so-called “easing bias” towards future interest rate cuts. Considering that Stephen Miran still opted for a cut, we saw the most significant voting rift since 1992.

Key takeaways from the minutes:

• A substantial portion of the discussion highlighted that should core inflation fail to cool, the Committee's next move could be an interest rate hike.
• Whilst Chair Powell attempted to strike a balanced tone during the April press conference, the minutes revealed the true extent of the Committee's concerns. The document strongly underscores the view held by many members that, in the current environment, the balance of risks to inflation is unequivocally skewed to the upside.
• A formidable hawkish axis within the Committee (represented by members such as Hammack, Kashkari, and Logan) had already formed prior to Warsh officially taking the helm.
• The minutes disclosed profound concern among policymakers regarding how the upward shift in the crude oil futures curve is beginning to drive up near-term market inflation expectations.
• Fed staff analysis demonstrated that following a period of cooling, labour market conditions had "stabilised". For some policymakers, this served as evidence that the economy is not on the brink of a sudden downturn and does not require support in the form of cheaper money.

Following the release, the EUR/USD pair remains stable around the 1.162 mark. Both the S&P 500 and the NASDAQ Composite are holding onto their gains.

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Michał Jóźwiak, Financial Markets Analyst, XTB