Controversial FOMC Minutes

The DOW Jones, NASDAQ, and S&P 500, the main US equity indices, closed slightly higher on Wednesday. Overall, trading in the forex and stock markets was rather restrained yesterday. Even important macroeconomic data in the United States did not make traders and investors trade actively. For instance, retail sales came well below the market consensus. However, the results had no effect on the market whatsoever. All hope was for the FOMC Minutes that was published later that night.

Speculation is increasing as to how many rate hikes are planned by the US Federal Reserve this year. Amid continuing inflation, market players initially suggested there would be a few of them. However, they are now assuming there could be at least 5-7 rate hikes. Therefore, the FOMC minutes were interesting in just one respect, that is, how many times the regulator might raise interest rates. However, market participants felt disappointed after the report had been published. On the one hand, the Federal Reserve said it would raise interest rates faster if inflation continued to mount. On the other hand, the central bank hinted at the possibility of a rate hike at the next meeting, which startled market players. In other words, the regulator seems to be not entirely sure whether a rate hike is necessary. At the same time, there is a 60% chance that the Federal Reserve would raise interest rates by 0.5% in March. The regulator also said that the QE program could end earlier than planned. Previously, the Federal Reserve had hinted at its full competition in February.

Interestingly, most FOMC members expected inflation to slow down in January. In other words, they still hoped that inflation would start to decline. However, there had been enough evidence that this would not happen. As for reducing the balance sheet, the Federal Reserve said it could happen later this year. Overall, the Minutes did not contain any important information that could somehow support or pressure either markets or the greenback. It only reflected facts markets had known even before Chairman Jerome Powell, who refused to believe that inflation was out of control and more aggressive measures were needed to tame it, did.