Fed Minutes reveal that Fed members do not expect a recession in 2023. Members also note that inflation pressures may require further tightening. Bitcoin price rose slightly in response to Fed minutes.
Fed minutes: More tightening may be needed!
The Federal Open Market Committee (FOMC) released its July meeting minutes. The Fed minutes sparked a limited response in the crypto and financial markets. According to the document, most Federal Reserve officials see “significant” upside risks to inflation. These risks may require further tightening. The two officials preferred to keep interest rates constant in July.
cryptocoin.com As you can follow, the Fed increased interest rates by 25 basis points, as expected at its July meeting, after the pause in June. Thus, the Fed raised interest rates to 5.25%-5.50%, the highest level since 2001. Fed Minutes reveal that respondents still forecast below-trend growth. It also shows that he sees a softer labor market as necessary to restore economic balance.
Key conclusions from the FOMC Minutes
- The opinion of the participants is that the tightening in monetary policy generally works as intended. They also expect the continued gradual slowdown in real GDP growth to help reduce supply-demand imbalances in the economy.
- Participants draw attention to the recent decline in total and core inflation rates. However, they stress that inflation remains unacceptably high and more evidence is needed to ensure inflation is on a clear path towards the Committee’s 2% target.
- However, according to the Fed Minutes, respondents note that, despite the recent slowdown in payroll growth, the unemployment rate continues to exceed consistent values over a period of unchanged, and nominal wages continue to rise above levels considered consistent with the Committee’s continued achievement of the 2% inflation target. .
- Under these economic conditions, nearly all attendees agree to raise the target range for the federal funds rate to 5.25 to 5.5% at this meeting. Respondents note that this action will consistently bring the monetary policy stance into an even more restrictive zone to reduce supply-demand imbalances in the economy and help restore price stability.
- A few respondents noted that they favored keeping the target range for the federal funds rate unchanged. Participants agreed that maintaining the current degree of restraint would allow further progress towards the Committee’s objectives while giving the Committee more time to consider this progress.
- Inflation is still well above the Committee’s long-term target. Moreover, the labor market remains tight. Therefore, most respondents see significant upside risks to inflation. This is why they say it may require further tightening of monetary policy.
- Members agree that the US banking system is robust and resilient.
Fed Minutes: Fed does not expect recession in 2023
Bitcoin price rose slightly in response to the Fed Minutes. Fed officials think inflation fears will likely remain stronger than expected. In other words, they state that such risks may require further tightening.
In addition, members are of the opinion that inflation pressure may cause more negative shocks to supply conditions in the USA. More importantly, officials do not expect a recession in 2023, according to Fed minutes. Does this mean the Fed won’t raise interest rates in the next few meetings? That’s the case, according to CME FedWatch Tool data, which tracks market participants’ views on the Fed’s target interest rate probabilities at its September 2023 meeting.
